Any entrepreneur knows that investments can not only help grow a business, but keep it alive. While the majority of startups fail (and half within five years), it’s important to understand that the second most common reason that businesses fail is because they don’t have enough money.
One of the biggest benefits that venture capitalists have is their ability to bring in much-needed funding to help promising businesses reach their milestones and goals. They also carry with them a slew of other benefits: access to their large network of contacts, experience working alongside companies in your industry, and strategic advice.
VCs want you to win; when you win, they win. However, there are right and wrong ways to go about pitching a venture capitalist. How you approach you pitch can mean the difference between a deal and a firm no. You can heighten your chances when you come prepared. Here’s the right way to pitch venture capitalists:
Know Who You’re Pitching
Although every venture capitalist invests, every VC is different. It would be a mistake to treat them as if they are all the same. For instance, when you go into a meeting with the same pitch that you used to speak with the last VC, chances are they’ll notice. Using the same template from one VC to the next wouldn’t be a smart strategic decision to make.
For this reason, it’s important to study their previous investments, take a look at any interviews they done, or research speaking engagements they’ve been too. Each of these efforts goes a long way towards painting a real picture of what that investor is looking for.
Studying those previous investments also helps put your business in prospective. You’ll have a better idea of the type of companies they invest in, and have peace of mind knowing that your startup fits their typical portfolio.
Focus on Your Introduction
Your goal is to capture your potential VCs attention right away. It helps ask them what they would like for you to focus on most. This way, you can spend a couple extra minutes explaining this part to them. For instance, perhaps they’re having the most trouble understanding how your business will scale. Or, they want more information about your market fit.
“Early stage Investors are typically looking to evaluate the thinking of an entrepreneur,” says Lee Jacobs, a venture capitalist and former partner at AngelList. “. We don’t necessarily need for you to have all the answers about your business, what we care about is that you have thought about the key issues.”
Practice your elevator pitch during this time, too. An elevator pitch is succinct way to convey all the important facts about your business premise in just one to three sentences. As soon as you say it, should reel the listener in and have them interested in learning more.
Stay Focused On the Mission
Any meeting with a VC could get your adrenaline running. However, it’s important that you stay focused on communicating your key points. Far too many entrepreneurs make the mistake of giving information overload, which can make a presentation feel scattered. Instead, you should be giving them enough information to gain an understanding—as well as a deeper interest. After all, the goal is to be able to score another meeting. If they don’t fully understand all the complicated details you unloaded, the chances of meeting again are slim.
Know How Much Money You Need
It’s difficult for entrepreneurs to fully understand how much money they need and should ask for. But this is one of the most important tasks you’ll need to focus on. Conveying your financials and how you’ll scale your business is crucial. The truth is, the you need to find the right balance between asking for the minimum amount of money you need to achieve your goals and budgeting for more money and more resources—because things always cost more time and money than you’d expect them to. You can also start a business with no money.
Asking for too much money and hoping to negotiate a lower amount—or asking for too little money in hopes of increases your chances of a “yes”—are both ill-fated strategies. You should work with a professional to have your business accurately valued before you begin working on your presentation and sit down to meet with a VC.
