How to make an effective presentation to a VC?
You came up with an amazing idea and designed a product. All you need now is an investor to believe in your idea and you, and support you to turn it into a real business. Naturally, you use your network and connections reach out to a Venture Capitalist you think is best suited to make your business a successful one. And, when that VC agrees to meet with you and hear your pitch, you think the hard part is behind you. Think again!
Every week I meet a number of entrepreneurs and listen to their pitches. What surprises me the most is that founders don't put the same amount of effort in making a kickass pitch as they do in reaching out to VCs and Angel Investors. They squander the opportunity by showing up woefully under-prepared. In this article I will discuss the 5 key mistakes founders must avoid to make an effective presentation to VCs.
A few weeks ago I, along with a couple of my colleagues, met a 20-something founder who was very passionate about his "idea". We kicked off the conversation with him presenting his solution. We discussed everything under the sun but at the end of the conversation we were left scratching our heads and wondering about the problem he set out to solve.
This is a classic mistake a lot of smart founders do. They just delve into talking about a solution they thought of without explaining the problem they are trying to solve and why it is worth solving. This is a key piece of information that you ought to present at the beginning of the presentation. If you don't explicitly mention this, it gives wings to a VC's imagination about what the problem is and whether or not it is worth solving.
The process of pitching is rather difficult. You have very little time to make an impact. Hence, it becomes all the more important for you to make the most of the time you got. You must give succinct and brief answers rather than giving long-winded answers. According to one study, people lose interest in a topic after a mere 18 minutes into a conversation. Moreover, when you cannot give a clear and concise answer then it raises questions about your preparedness and the VC's BS meter goes off the scale.
A VC's interest in your company depends on whether or not your business is scalable. So, its imperative that you make a case for it. You need to do homework on such topics as the Total Addressable Market (TAM), target customer segment, target market share etc. Even though you have a terrific business idea, if you cannot make a case that there is a sufficiently large market for your idea then there will be no takers for it. I see a fairly large number of entrepreneurs just winging the numbers. Nothing undermines you and your case more than you being not clear about these fundamental things. VCs typically have domain expertise and they can easily call out any numbers that look dubious. So, take your time and do your homework.
This is a sure shot way of losing a VC's attention. While you may be an expert in your sector and know all the abbreviations and acronyms, the VC you are pitching to may not. If you are a tech startup in the logistics industry and pitching to a tech VC do not assume that he or she would know what an LCL is or what an FCL is (For those who are curious LCL is Less than Container Load and FCL is Full Container Load). It doesn't hurt to use the full form.
One of the most underrated benefits of engaging with a VC is the feedback he or she gives the founder. However, very few founders take the feedback in a constructive way and act on it. Do not go into a meeting with a VC hoping that you would close the deal. It is a sure shot way of setting yourself up for failure. But, go into one thinking of it as an opportunity to have someone to critique your idea. It is not uncommon for founders to be blindsided to the shortcomings in their business ideas. Feedback you receive from VCs often puts a spotlight on these issues you may have ignored. Furthermore, a lot of VCs would look upon you favorably if you take the feedback, incorporate it into, and revise your idea. They are more likely to reengage with you when you do this.
The information and the views in this article are those of this author. They do not reflect the opinions of Kstart Capital or Kalaari Capital.