The investor pitch. It's feared. It's desired. It's terrifying.
But don't worry: We've got you covered. Here's everything you need to know about that all-important investor pitch.
Invisu.me Co-Founder and CEO Donna Griffit is a master pitcher who has helped countless founders distill their pitch down to exactly what they need — and nothing they don’t. She had the opportunity to sit in on a private pitching event where a delegation of startups had the opportunity give a five minute pitch and receive direct feedback from a group of top-tier Silicon Valley VC’s. (So top tier that she can’t even say who was there but, trust us, you will want to memorize this section before your next pitch.)
Here’s what she found, in her own words:
You must remember — VC’s are in it to win it. Talk to them with numbers. They have to be able to see the huge market potential and you have to be able to draw an accurate picture.
You must be able to tell the market size and your share of it. If it’s small, show them that it’s set to grow and back it up with proof. They want to be excited by the overall opportunity.
From the get go, you must set the context of the market: What’s the broad theme proving why you are going to be a big company – i.e. $XB moving into your space, massive fragmentation, what type of solution is missing for this market and how you fit right in.
And, if you are part of a fast evolving market – what will keep you unique in the value chain when competition strikes?
One more thing: I’ve been saying for years that this is the silver bullet of your pitch – and now these investors backed me up: Tell them: Why now? Why is your product/solution/technology something that’s time has come? What’s the enabling factor? What are the trends pointing towards it? And if you didn’t exist – what trend would still be happening? What is the bigger trend that you are absolutely hooked into?
You need to set the stage so they understand your customer, their needs, and how your product benefits their needs. In other words, this is the classic problem/solution storytelling, but on a very sophisticated level.
First, draw a picture of the problem and the audience suffering from it – give a few use cases that exemplify why you are needed. Show that you have an in-depth understanding of your customers.
Oh, and to clarify: Someone who pays you money is a customer. Period. Do not have a slide full of “customer” logos if they aren’t paying. Non-paying users should be called prospects or pilots. This can really wreck your credibility.
Having a product demo is super important – especially if it’s a great looking product. But you don’t have to explain every point on your product. Walk them through the demo from a user perspective with their unique needs and constraints in mind, show off some cool features briefly, and mainly focus on the assets and benefits you provide.
One More Thing: If you are in an emerging or highly regulated market where things are still “up in the air” like drones, or “at risk” like InsuraTech, make sure to talk about the regulatory issues, show that you’re familiar with them and what you are doing to address them.
This section was the most eye-opening to me – and the most important piece of this article!
According to this group, all early stage VC’s are always imagining your next round. As you’re talking, they’re thinking through the next 18 months and when you’re ready to raise again.
One of the investors said: “Once I write a check – I’m on the hook to help you raise your next round. Having clarity on what you’re going to achieve in the next 18 months is super important for me to see how you’ll raise your next round and how I’ll onboard the best investors for you.”
So talk about what your monthly recurring revenue (MRR) will be. Give them the roadmap so they can see if you can execute. What are key performance indicators (KPIs) you’ve already hit and KPIs you’ll deliver? It’s not fun and games — it’s a real business.
If you don’t have recurring revenue, you aren’t VC-investable. It doesn’t mean that you aren’t a great company, but VCs want to see products that have a repeatability of income, something that keeps the money flowing in – not a one-time purchase.
Talk about your raise and your metrics: What’s your “proxy for revenue” – meaning what are the numbers for your current DAU, WAU and MAU (Daily, Weekly and Monthly Active Users) and how will that continue to grow and bring in revenues after you raise? And if you have absolute numbers of growth, users, and revenues, show them a breakdown, a timeline of how you got there.
One More Thing: While you don’t necessarily want to spell it out on a slide, you must have a well thought out exit strategy. The same investor went on to say: “I need to be able to envision the Act 1, Act 2, Act 3 – where are you going? Even if you fail will you be a nice exit by then?”
I always knew that investors hated the chart with the checks and x’s showing you and your competitors. I didn’t realize they felt almost as vehemently opposed to the 2X2 or magic quadrant.
They said it bores them because everyone has it and it always looks the same, with your company at the top right. One of the VC’s actually said that a company that was pitching them tries to “shake things up” and put their company on the bottom left – and everyone got mad at them.
(This to me proves that people think in schemas and the 2X2 actually has some merit if done right.) If you are going to have it, make sure that the X and the Y are meaningful – not just something like – “affordability and availability.”
When I asked them what alternatives they suggested to show as a visual, there were a few great suggestions:
Show your competition and how you measure up on a marketscape. Show where there are solutions and where the “gaping hole” is that you will fill in. “Don’t be afraid to use a little hubris – show a dot – “We’re here – here’s where we’ll be in 2019 – the biggest guys on the block” – show sector understanding and why do you think you’ll get from here to there?”
Just Show your Competitors
Have the logos of the top competitors, say a few words about them, and show that you understand what they’re doing, then talk about your uniqueness, your magic, your secret sauce – especially if you’re in a very crowded space where they might be suffering from “pitch fatigue.”
One More Thing: One of the VCss said: “Talking about competition builds trust with VCs if you do it right. What we really want to know is what are you doing differently? Why are you faster? Bigger? It’s all about speed of execution – how will you compete with the big players? I’m not interested in hearing about the little startups out there, I want to know how you’ll compete with the Googles and Apples of the world, or the startups back by Greylock, Sequoia or Andreessen Horowitz.”
And above all, don’t be dismissive about your competition – “we’ve got it covered, they’re no match for us…” and such – show that you don’t take your competition seriously!
Many of the startups pitching had a “golden nugget” – i.e. a big customer, distributor, or partner – and very few of them made a big enough deal about it. These points of validation are crucial and can make all the difference in the world for if they’re listening to you or not.
Open with something exciting and close with something exciting! Lead them on a journey, pique their attention! In the opening, when you talk about the audience you are serving and their problem, show just how big the problem (i.e. losing money) or the opportunity (i.e. money out there to be made) by using numbers. And let them know how much money you’ll help save or earn!
One More Thing: If you landed a deal with a channel partner but haven’t started distribution through them, look at a similar product they partnered with and use their sales metrics to show how you’ll probably look pretty similar.
For years, I’ve been trying to persuade startups that it’s worth investing in the graphic design of a presentation. If your pitch deck slides look shoddy, this is a reflection of your product, your brand, your company. Often I get scoffed at and told that investors don’t care how it looks. This group definitely validated my point.
All of the companies with slides that weren’t up to par were chastised. They said the the slides must match the aesthetic of the product, so just get your UI person to work some magic on your slides as well!
They all agreed it shouldn’t be text-heavy or too busy and, as I’ve said for years, the rule of thumb is “one big idea per slide” not 10 ideas crunched onto one slide! And write your one point as the title of your slide.
They also asked that you please number your slides so they can tell you where to jump to when they want to discuss.
One More Thing: This part is true for “presented presentations.” You can also create a send-out version that looks great, but which is an abridged, PDF’d version with a bit more text on it. Don’t try to turn the presented version into a textual, “teaser deck” just because you want to be able to send it out. You should have two versions!
I once had a VC tell me that they saw so many good companies that they always looked for reasons to say no than to say yes.
For example, his biggest pet peeve was if a founder glanced at their phone during a meeting. This was a big no-no and an automatic red flag for them. Sounds a bit extreme?
Maybe – but they see how you behave during the meeting as indicative of how you will behave in your business.
Here’s a few big red flags this group of VC’s called out:
Don’t Make Excuses
If something doesn’t work – screen resolution, sound, etc. – don’t go making excuses for it. They might not have noticed until you drew attention to it. One of the startups that presented had a sound technology, and they apologized for the poor sound. I cringed. First of all, it didn’t really sound that bad, but now they thought it did. Second of all, if you have a sound element – make sure you come with the most advanced portable speakers around! Ditto for something visual – high res screen!
One of the biggest faux pas I see founders make is arguing a point with an investor or out right saying that they disagree. You might disagree with them, you might even have proof that they are wrong. Just sit there, take the feedback magnanimously, and try not to take it as a personal affront. Perhaps follow up later with a note thanking them for their feedback and some stats that politely back up your point, or just leave it. This will send them running for the hills because if you argue in your first meeting, how will Board Meetings look?
Do Take Notes
One of the things VCs look for is the attentiveness of the entrepreneur – they should be taking notes – otherwise it’s a glaring sign for them. And the CEO should at least appear to be taking notes, even if the CTO or CMO is along scribbling furiously. Pen and paper or notebook looks more like note taking than taking notes on your laptop – or worse – your phone! For all they know you could be checking your email and not listening to them. “Until you visibly accept our feedback – i.e. take notes and nod – we don’t think you got it. We need that visual cue.”
This is the answer you want, right? It’s the answer we all want: what are investors looking for in a pitch? What’s the detail that makes them decide whether to invest – or not?
If only it were as simple as one single thing, or even a checklist that would guarantee you the money in the bank every time. But the frustrating reality is that every investor is different. They all have slightly different things they tend to look for when evaluating a potential opportunity.
One may be a strict by-the-numbers person who look for strong numbers. Another might be a sucker for a giant market size and the potential of a 100X return. A third might just go by their gut, or a feeling that they have about the founder standing in front of them.
That being said, there are some things that all investors tend to look for when they’re listening to your pitch. The way pitch expert, Invisu.me Co-Founder and CEO Donna Griffit Donna sees it, the essential investor wish list for any potential investment breaks down into three core buckets: Credibility, Likeability, Momentum.
Do these people know what they’re talking about? Do they know their company and their industry backward and forward? Have they done their research? Do they have the right knowledge and experience to make this happen? If they don’t have the knowledge, does it seem likely that they’re able and willing to gain it?
Do I like this company and this product? Do I feel good about what they’re doing and what it will mean to the world? And, just as importantly: do I like these people? Do I feel good about spending hours and hours with them over a span of who knows how many years working to make this business happen?
Do these people have the GSD factor? Are they getting shit done on their own, or are they waiting for my money to magically make it happen? Would my money be kindling on a fire that’s already dead? Or would it be gasoline on a fire that is already burning strong and just waiting for some fuel to blow it up?
The element that seals the deal may be different from investor to investor, but if you evaluate your pitch in light of these three core values, chances are you’ll be speaking investors’ language more often than not.
Donna also has great tips on what should be included in your pitch deck.
“When you see about 50 investor pitch decks a week over 14 years, you see a lot of repeat mistakes,” Donna says. “And when you fix these decks, you see many successes.”
Check out her full article on how to create a killer pitch deck for her in-depth tips and tricks..
And, of course, there are certain things you should absolutely never do in an investor pitch. Donna covered some of them above, but let’s hear from some other experts about top investor pitch pet peeves.
Business and pricing strategist Jason Plimi says, “avoid buzzwords. Every founder thinks their idea is disruptive/revolutionary. Every founder says their financial projections are conservative.” So even though it’s tempting to throw some trendy tech words in there, just don’t. Instead, Jason says, -explain your validation, customer traction, and the assumptions underlying your projections.
VC Alexander Crutchfield says the number one no-no he sees in investor pitches is actually something he doesn’t see: a sensible summary of financial projections.
“By this I mean financial projections that omit working capital requirements, that underestimate costs, that underestimate capital required, that overestimate revenues — in short financials that are just a series of straight line projections,” Alexander says. “Projections don’t have to go down to the level of how much you will spend in year 22 on stamps, but they do need to have coherence.”
DC ArchAngels Founder Randall Reade agrees.
“Anyone who thinks that the financials are just made up numbers anyway, so you can just throw up anything that looks good will not get any funding from any real investor,” Randall says. “Make your financials as real as you can by having a CFO experienced in the industry.”
Both Jason and Randall hate it when founders focus solely on the product, and not so much on the business.
“Investors only care about one thing, and that is whether an investment in your company will make them money,” Randall says. “The product itself isn't as interesting as the company. Therefore, do not spend all your time telling us what a great product you have — that's a sales pitch. Instead, tell us about how much money your company will make.”
And, finally, Randall says, “Never say you’re ‘passionate.’” Because if you’re not passionate, why are you here?
Want to learn even more about great pitching strategies? Check out these articles. Pitching to Investors: What You Need to Know