VIEWS: 1,448 PAGES: 16 CATEGORY: Angel Investing and Venture Capital POSTED ON: 11/20/2009
This slide deck has insights, tips, techniques, and best practices for raising capital and pitching VCs and angel investors. It is a collection of simple but often-forgotten techniques and nuances that can help make the difference between a successful fund raise and rejection. This slide show was originally presented to an audience of 300 entrepreneurs at the Startup Idol conference.
COPYRIGHT 2009 VENTUREARCHETYPES, LLC Proprietary & Confidential Do Not Distribute 415-370-5060 A Field Guide to the Perfect Pitch Startup Idol Conference Nathan Beckord, CFA VentureArchetypes, LLC July 23, 2009 Startup Best Practices: Hello and Welcome My name is Nathan Beckord, founder of VentureArchetypes. We are a business strategy & startup consulting firm in SF: www.venturearchetypes.com Over the years I’ve pitched to 100’s of investors and been involved in more than a dozen financing, both indirectly and directly. So hopefully I can share a few of the lessons learned, oftentimes the hard way. A lot of these tips are basic common sense, but often neglected. A good pitch is really just the summation and execution of hundreds of small-yet-elusive nuances. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Agenda Proprietary & Confidential Do Not Distribute 415-370-5060 Intro– The Pitch Defined Preparation & Process Content Structure Audience Tuning Delivery Tips- Do’s and Don’ts Elevator Pitch Template 1st VC Meeting Pitch Outline So here’s our agenda… We’re going to define the pitch and talk about why it’s important, Then get into the process for developing a really strong one. We’ll look at a couple examples and outlines, Then get into delivery tips– do’s and dont’s COPYRIGHT 2009 VENTUREARCHETYPES, LLC What is a Pitch? Proprietary & Confidential Do Not Distribute 415-370-5060 A pitch is an attractive lure that has a hook attached to it The Goal: A. Get a meeting B. Get the 2nd, 3rd, and 4th meetings until you get funding (or a firm “no”) So what is a pitch? It’s simply something attractive, that gets people interested in what you’re doing, and leads to an action. In this case, that action is a meeting, and then a series of progressive meetings until you get funded. It’s very common to go through multiple rounds of meetings with more and more partners present at each meeting. COPYRIGHT 2009 VENTUREARCHETYPES, LLC What type of pitch? Back of the napkin? Elevator pitch? In-office meeting? Progressively deeper levels of information Proprietary & Confidential Do Not Distribute 415-370-5060 Negotiations / Structuring / Close Due Diligence Documentation Level of Investor Interest Business Plan / Additional Detail Pitch Deck / Exec Sum Elevator Pitch / Email Teaser Level of Detail In Your Pitch When we say the word pitch, we’re really talk about several kinds of pitches… We start off with an elevator pitch, used in an introductory email or (live) at a conference like this If done right, it gets you invited to Sand Hill to present your full pitch for an hour on. And it’s really a continuum, with progressively greater levels of detail at each step… Today, we are focusing on the elevator pitch and VC pitch meeting COPYRIGHT 2009 VENTUREARCHETYPES, LLC Why is it so important? Proprietary & Confidential Do Not Distribute 415-370-5060 “The statistics of obtaining funding dramatically improve if you get that first meeting. If you get to a meeting, your odds of getting funding increase 30 times from 0.3% to over 10%. These statistics demonstrate why it is crucial how you get to your VC, because you are more likely to get a meeting if your materials reach the VCs desk through a trusted and friendly source.” ~from David Blumberg of Blumberg Capital, and published in How to Value Your Business and Increase its Potential, by Jay B. Abrams, McGraw-Hill. Your pitch is a very valuable sales tool– you’re selling your team and company to a group of sophisticated but cautious buyers. Again, the goal is to get that first meeting…because if you get the meeting, your odds of getting funded are exponentially higher. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Preparation & Process First: Pick your best cat herder Figure out your audience (more on this later) Develop ideas first, slides 2nd Then: Start with an attention grabber Quickly get to the ‘a ha’ moment Tell a complete (short) story And of course: Extreme text minimalism (“highway billboard”) Weave in a killer, kick ass demo Tout your numbers if you’ve got ‘em Proprietary & Confidential Do Not Distribute 415-370-5060 So here’s how to get started. First: •Pick a facilitator– someone who’s good at wrangling ideas together •Figure out what your audience wants to hear– we’ll talk more on that in a moment •Step away from the computer– sketch out key concepts & ideas first, then put ‘em down on slides Then: •Start with an attention grabber…a story or anecdote or a really interesting use case, ideally something with an emotional connection…why you started the company, a vexing problem that inspired you, or an opp that you saw. Spend a lot of time on your first hook. •Then get to the point…what is it you do? Use analogies as appropriate (“eBay for industrial equipment” or “Facebook for nudists”) •Then tell the complete– but short– story of your business. I’ll show you an outline in a few minutes. And of course: •Keep it very high level…the metaphor is that each slide should be like a billboard…you’re flying down the highway, you have 3 seconds to process the billboard’s message •Your product demo should be awesome…it should have the “wow” factor. It should also be obvious and intuitive, and not take a lot of contextual explanation •Do tout your number if you’ve got em…traffic and growth, active users, paid subscribers, etc. This is especially powerful if you created an emotional connection earlier, to follow up with an analytical one (tickle both left brain & right brain) COPYRIGHT 2009 VENTUREARCHETYPES, LLC Elevator Pitch Template Analogy What we do Proprietary & Confidential Do Not Distribute 415-370-5060 Hi, I’m Joe Smith, founder of Acme Software. We develop sales lead tracking applications for the real estate market. It’s like CRM, but with a lot of embedded data and very powerful analytics. Our home pricing tool is more than twice as accurate as the leading competitor, due to our proprietary data scraping engine. And, our UI is easier to use because it was based on 6 months of shadowing agents in the field. This helps agents sell more homes, faster, at higher prices. Our business model is a “freemium” subscription service, where agents pay a monthly fee for access to our database after an initial usage level. Our upsell rate is 65%, based on 7,000 trial users. We are currently running beta trials with two of the largest local brokerage firms. We have raised $1 million from angels. We are seeking $3 million in VC funding for marketing and hiring. This will get us to a national launch with 6 additional brokers in Q1. Why we are better How we make money Current status What we need and why “Hooks” So here’s a basic short form pitch See how there are at least 6 “hooks” that are attention grabbers, and that set up a deeper dive, that prompt further questions… Now, does anyone remember Mad Libs? COPYRIGHT 2009 VENTUREARCHETYPES, LLC VA Elevator Pitch Template My name is ____________ Proprietary & Confidential Do Not Distribute 415-370-5060 name , and I am CEO of ___________________________ company name . We are a developer of market. Our product/service . We do this . __________________________________________________________ product name or brief description of what you do for the ____________________________________ name the market __________________________________________________________________ describe a specific problem you solve or need you address better, faster, cheaper, etc. for ____________________________________ specific target customers _____________________________________________ than the competition because main source of proprietary advantage or “secret sauce” ___________________________________________________________ Our business model is At present, we are We are seeking ____________________________________________________________________________________ how you make money– e.g., license sales, subscriptions, advertising, etc. . __________________________________________________________________________________________________ describe stage of business– concept stage, in product development, beta trials, etc. _______________ $XX million in funding to be used for __________________________________________________________________ launch, commercialization, marketing and sales, hiring, etc. . This amount will get us to is ___________________________________________________________________________________ describe next major milestone– e.g., commercial launch, profitability, etc. . Our exit strategy ___________________________________________________________________ IPO, acquisition, etc.– name possible acquirers if relevant . Optional: selectively include other key points, such as current investors, major partners, or customer traction as appropriate. Remember: your main goal is to hook their interest– not describe your entire company or technology. This hook will encourage investors to ask follow-up questions and engage in further dialogue. Email me for a copy: firstname.lastname@example.org Here is a very basic fill in the blanks elevator pitch template, like Mad Libs Email me at nathan@venturearchetypes and I’ll send you a copy So that is the short form pitch, the one that gets you invited in the door. Once you’re in there, we expand this into the full investor pitch…. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Proprietary & Confidential VC Meeting Pitch Deck– Topics to Address Who– are you? What – are you doing? Why – are you doing it (Pain or opportunity + size) How – are you doing it? (Your solution, and how it is better) When – why now? (Have you launched? Growing? etc.) Do Not Distribute 415-370-5060 Then, How – will you get market share? (aka, Marketing and Sales) Who – else is doing it? (aka, Competition) How Much – money do you need? How Far – does that take you? (Milestones) How Much – money will it make? (Business + Financial model) Who – else is on the team? (full bios) So here’s the general content of a VC pitch. It’s a lot like an elevator pitch, but with a few additions. Mainly, it should cover: Who What Why How When, in a logical manner. Then, in contrast to the elevator pitch, it’s got some additional detail: • How will you get market share-- marketing, sales, and biz dev plans • Who are your competitors? And an analysis of them… • How much are you asking for? • Where does that get you? • How do you make money, and how much do you make? • Who will do this, and what are their special skills? COPYRIGHT 2009 VENTUREARCHETYPES, LLC • Sequoia’s Outline 1. Company Purpose 2. Problem 3. Solution Define the company/business in a single declarative sentence. Proprietary & Confidential Do Not Distribute 415-370-5060 6. Competition 7. Product List competitors & competitive advantages Describe the pain of the customer (or the customer’s customer). Outline how the customer addresses the issue today. Product line-up (form factor, functionality, features, architecture, intellectual property). Development roadmap. Your company’s value prop. to make the customer’s life better. Show where your product physically sits. Provide use cases. 8. Business Model 4. Why Now Pricing, Revenue model Average account size and/or lifetime value Sales & distribution model Customer/pipeline list Set-up the historical evolution of your category. Define recent trends that make your solution possible. 9. Team 5. Market Size Founders & Management Board of Directors/Board of Advisors Identify/profile the customer you cater to. Calculate the TAM (top down), SAM (bottoms up) and SOM. 10. Financials P&L, B/S, Cash flow Cap table, The deal See also Guy Kawasaki, Brad Feld, etc… Here’s a more detailed outline, this one from Sequoia. As you see here it matches up with what we just discussed… Who are you, what are you doing, why are you doing it, etc. Approximately 10 slides, and you should aim for around 20 minutes in total. That means an average of 2 mins/slide... = high level Other good outlines are from Guy Kawasaki, Brad Feld, and hundreds of others. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Audience Tuning Stage Seed Focus Areas Initial market validation points Team, team, and team Product specs & advantage Initial customer traction / adoption Show how VC $ will add “fuel to the fire” Plus, all of the above Growing momentum - sales numbers, trends and economics New growth avenues, Exit possibilities Plus, all of the above Proprietary & Confidential Do Not Distribute 415-370-5060 Series A Series B So now let’s talk about tailoring the pitch for your audience. •There are certain expectations where you should be, given the level of funding you seek. •The onus is on you to get yourself to a point where you’re ready to raise capital and where you’re attractive to investors, or you could blow a perfectly good pitch opp… •Now, having said that, it can be useful to get a dialogue going before you’re actually ready to pitch…the analogy is of a job seeker asking for an informational interview vs. an actual interview… •But the clock starts ticking when you start the dialogue, and you need to show progress and momentum each time you interact •So the key thing here, at the seed level, is showing you have some level of validation, that you’re not building something in a vacuum. You may not have sold anything yet, but you’ve talked to potential customers and they like what you’re doing…and they’re willing to state that •At series A, especially in this market, you need to show some traction. Not always a fully baked business model, but at least some ideas for one, and some evidence that shows people are using your service (and sticking with it). •At series B, it’s really a numbers game…showing growth and that each dollar in marketing spend generates $6 in revenue and $2 in profit. •These expectations are shifting upwards due to the tough funding climate. COPYRIGHT 2009 VENTUREARCHETYPES, LLC More Audience Tuning Connection: Know who will be there Get them involved, interacting Ask lots of questions Make it personal Messaging: Tell them, show them, tell them again Use cases to connect the dots Have a memorable mission or mantra Proprietary & Confidential Do Not Distribute 415-370-5060 •Know your audience–Ask the admin who will be attending–which partners, domain expert, associate, etc. Pull their bios off website or LI. Look for a common interest or shared connection. •Get them involved…set up a dummy account pre-loaded with their info…get them interacting with your product, vs. listening to a lecture. Also, keep it conversational… •Ask questions to get them talking, sharing ideas. This is a sales meeting, and good salespeople ask probing questions. Ask where they see the space heading…VCs rarely lack an opinion. We want them thinking about your idea long after you’ve left. •Make it personal-- Speak from the perspective of your customer. Show it’s not just a clever app in the cloud, but something people are using on a day to day basis to do really cool things…how they are saving money, living better, solving problems with your product. Bring a bunch of examples– sometimes VCs get stuck if they can’t envision themselves personally using it. So you need to show how other people, who are unlike them, are finding real value in it. •Tell them what you are going to tell them, then tell them, then tell them again. Show your agenda upfront so they know what to expect. And, a strong recap at the end tees you up for the close. •Use cases, metaphors, simple scenarios to make your points clear…For example “Hulu is like Youtube but for full-length, professional programming” •Mission: we worked with a wine software company that enables wineries to sell direct to retail. Their mission was to break the bottleneck that wholesalers and middleman have had on the industry since Prohibition ended. Or think back to Salesforce’s early marketing, with it’s “No Software” logo. These are missions to change the world. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Delivery Tips: Top Ten To-Do’s 1. Know your material 2. Engage the audience 3. Manage the clock 4. Keep it painfully simple 5. Polish the non-verbal 6. Make it memorable 7. Repeat as necessary 8. Control the presentation 9. Create a killer summary slide 10. Go for the close, steely-eyed and cocksure. 11. Bonus: Have fun with it! Proprietary & Confidential Do Not Distribute 415-370-5060 1. Know your material…practice in front of your attorney. Practice slides out of order. Rehearse Q&A. It will start to flow naturally and you will come across very confident. 2. Engage the audience– this goes back to the “hook”. Get their attention right away and keep it…use a story, get them involved, get them participating. If they start checking their iPhone you’ve lost them. You’re fighting ADD. 3. Up to you to manage the clock. VCs are often running late, but your meeting has a 1 hour hard stop-- time flies by. Do time checks periodically. Keep answers brief. Get there early to set up. 4. Keep it painfully simple…esp. for technical products, explain it like you would to a 10-year old who has English as a second language. Also, keep it uncluttered. Avoid jargon. 3-4 bullets max per page. Put extra information in backup slides.. 5. Non-verbal: Use pacing and pauses for emphasis. Videotape yourself and watch your body language…is it open or restrained? Practice extensively with a critical but “friendly” audience. Balance enthusiasm with modesty and poise. 6. Make it memorable– you gotta stand out! You are number 3 on a list of the 8 pitches they see that day. Make sure that a week later, at the next partners’ meeting, they remember what you do and what makes you unique. 7. Repeat core elements. Repetition & stories also help with memory retention 8. Control the presentation– allow for some diversion, but don’t get off track. Control team members, politely. Remember, it’s a CEO audition. 9. Create a killer summary slide to end on, and make sure you get to that slide… the 3-4 Key Points that make your company deal a hot deal…this aids in retention, and it sets you up for… 10. The Big Close: Ask for their involvement. Ask what next steps are, and what they think. If it’s clearly not a fit, ask for intros to others. And…have fun with it! It’s really very exciting! You’re at the center of the startup world, pitching to investors. Very cool. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Delivery Tips: Top Ten To-Don’ts 1. Don’t 2. Don’t 3. Don’t 4. Don’t 5. Don’t 6. Don’t 7. Don’t 8. Don’t Proprietary & Confidential Do Not Distribute 415-370-5060 9. Don’t state a specific valuation 10.Don’t fabricate other VC interest advantage” “1% of the Chinese market” etc. bring unnecessary people speak to the screen use as much text as I do get funky with animation get stuck on proving a point (not) know your numbers fake an answer say “NDA” “no competition” “conservative numbers” “first mover 1. People: Bring CEO, CTO or product guy, maybe the finance guy. Thus you have the tech guy, the sales guy and the numbers guy. 2. Don’t read from your slides or face the screen…maintain eye contact 3. Don’t use much text. Guy Kawa recs 30 point font, which is pretty extreme, but forces you to boil it down to bare elements. Some of the best pitches are ones where the projector is dead and it’s a discussion. 4. Avoid animation, creative backgrounds, fancy builds, etc. 5. Don’t prove a point– don’t let a “hostile’ question get you off track. I’ve seen it where CEOs “win” the argument but lose the deal. 6. Know your numbers, even if you’re not a numbers guy. Know the major assumptions in your forecasts…burn rate, revenue per customer, cost to acquire a customer, etc. 7. Don’t fake an answer, if you don’t know, admit it but follow up quickly afterwards with an answer. (But, you should have rehearsed and compile common q’s) 8. There are certain key words that signal an amateur…these are a few. 9. Don’t state a valuation. There is some debate about this, but in general give a wide range, or say you’ll let the market decide. 10. VCs talk…if you indicate that you have another VC hooked, you’d better have a term sheet. However, I’ve seen scenarios where someone “accidentally” leaves the name of another VC firm on the title slide, or where an outlook email window from another investor pops up in the middle of the presentation…but never fake it. COPYRIGHT 2009 VENTUREARCHETYPES, LLC 50,000-ft. view Startup Formula for the “Perfect Storm” Proprietary & Confidential Do Not Distribute 415-370-5060 Position the company correctly with a clear, compelling story polished materials, and passionate presentation + Target the right investors; Reach them through warm referrals + Demonstrate management’s execution credibility through early sales, partnerships, and recruitment skills = “Perfect Storm” for raising capital and maintaining negotiating leverage So in summary, the goal is to create the perfect storm and get some “heat” going on the deal •Obviously, as a baseline we need a solid business idea and investment opportunity, but assuming we’ve got that, we need to communicate it effectively. •In short: We tell the Right story, to Right people, in the Right way…. •And you show that you have been making things happen, generating momentum…and that you have a plan to continue to make things happen and generate a return on their investment…Perfect Storm. COPYRIGHT 2009 VENTUREARCHETYPES, LLC Thank You Proprietary & Confidential Do Not Distribute 415-370-5060 www.venturearchetypes.com Nathan@venturearchetypes.com P: 415-370-5060 Contact us for more information on our services: •Business Planning and Startup Strategy •Investor Materials Development (Pitch Deck, Exec Sum, Financial Models) •Interim CFO Consulting, Due Diligence, and Deal Assistance •Business Development and Partnership Consulting We look forward to working with you.
"Raising Venture Capital: How To Give The Perfect VC Pitch"