Once you find yourself a list of ideal partners of investment firms that you wish to reach out to for investment, you need to learn how to contact them and make sure that your pitch is perfect.
In this article, I am going to show you how you can contact a VC, how you can make the pitch, the types of pitch you need to prepare for, and hopefully, if you do it all right, you can get yourself a large sum of investment.
3 Ways to Contact VCs
- Get an introduction – This is the best and the most recommended route as it gives you priority. If you can get entrepreneurs whom the VC has previously backed, other VC investors, Experts/ Executives / Professors, and Lawyers / Accountants whom the VC knows to vouch for you, then you can be assured that you have got a foot in the door. Use LinkedIn to help you out in this regard.
- Meet them online or offline: You can always follow their blogs, tweets, or LinkedIn profiles. Try to get an offline meet as that’s the most personal route. You can also like their posts, comment on their blogs, or retweet their tweets in order to develop a personal connection beforehand.
- Cold contact is least desirable, but you can call them without an introduction or meet them at an event or conference or online. A direct email may be used, but avoid the general email box posted on VC’s website as it often goes to the trash bin. You can also use LinkedIn to directly connect with the concerned VCs.
There are several guides on email outreach that you can follow. But in short –
- Start with a Teaser email. Don’t send the entire PowerPoint pitch. Just put in two lines and offer to provide more if they ask.
- If they reply to your mail and ask for more, send an Executive Summary or PowerPoint (whichever you think is stronger).
- Goal of your email communications is to get a face-to-face meeting.
VC Presentation
Venture investors look for companies who can scale quickly with an infusion of capital, and get to an exit event. Out of 10 investments, they follow the 2:6:2 rule: 2 losses. 6 break-evens. 2 home runs.
VCs need the ability to earn 10x return on your company, so you need to show them how you can turn every $1 million of their money into $10 million.
You can improve your skills by practicing. Each investor pitch will improve your skills. Make sure to meet with at least two investors from your Tier 2 list before you start pitching to tier 1s. This is like testing your pitch Off-Broadway. Next, schedule 4-5 meetings with investors from your “Tier 1 List”. Limit the number you work with to around ten.
At any given moment, you can only add new firms to your portfolio if the existing ones aren’t interested or leave. Although other investors might be interested, the primary focus should be on finding the lead investor.
Once you have identified the Partners of Tier 1 or Tier 2 firms that you are interested in engaging with, you can find a way for warm introductions. Good investors get a lot of inbound, but can only invest in a fraction of the opportunities that they are offered.
Warm introductions from strong connections will grab their attention. You also get the benefit of having a feedback channel following the meeting. After you have made warm introductions to investors on your shortlist, it’s time to put together a pitch deck that showcases your story and highlights the key points that investors want.
What Makes a Great Pitch?
Your customer presentation is different from your investor presentation. Both have very different goals although both are meant to sell.
However, the investor presentation must contain a compelling narrative about the team, the huge opportunity for the company and the economics of this business. It should also include milestones that will result from this financing.
You must understand your investor’s audience and what they are looking for in order to raise capital. A great pitch considers the following:
- Understand the Investor’s point of view:
- Who are you presenting to?
- How sophisticated are they?
- What are THEIR needs?
- What are THEIR goals?
- Are they viewing you with skepticism?
- Tell Stories
- Facts don’t inspire; stories do.
- People just aren’t that good at remembering facts. Grab Attention with a good story
- End Powerfully
- “Last words linger” – Tell the inspirational story of realizing vision
- Reiterate the key exciting points
- Ask for the next meeting
Slides are great, but you must be the main attraction.
An investor who is a good one knows that successful entrepreneurs must be able to convince customers and investors.
Part of the evaluation includes showing how you do it.
How You Can Structure Your Pitch
- Gambit Opening – Begin with a customers’ view of the problem you are solving and the benefits it offers when it is implemented. This tells the listener if you are a genuine entrepreneur who has insight and problem-solving skills.
Investors will want to know your passion and motivations for starting the business.
Objective: Get the listener to pay attention.
- What is your background and who is currently on the team? Investors will assess –
- Whether this group is uniquely qualified and,
- Whether they are able to recruit the best team to build any lasting company.
It is up to you how the slides are ordered. Some prefer to keep this at the end. However, I recommend that it should be included at the beginning of every presentation. This informs the audience about who is pitching, and it is often one of the strongest aspects of any pitch.
Objective: Describe yourself and your team so that the investor can understand why you are uniquely qualified to solve this problem.
- Problem Statement: Zoom out to discuss the larger trend in the world, and zoom in on what pain you are dealing with.
Objective: Find common ground to agree that there is a clear opportunity in the market today. You’re looking for agreement and nodding heads. Now is the right time to fix it.
- Market Slide: Classic total addressable market (TAM) – Venture investors need to have a market large enough to not have to do the math. The potential revenue is in the billions (not necessarily now, but within a relevant timeframe for this company).
To prove this point, we recommend doing a bottoms-up analysis.
Objective: All investors invest only in home-run opportunities. As such, they should not question the market size that your product/service addresses, after this slide. It is clear that the prize is well worth the effort.
- Solution – Give a brief explanation of what you are doing in just 1-2 slides.
Explain it in 25 words. Highlight the most important aspects of your solution to customers and what is difficult to build.
A word of warning: Don’t get into every technical detail. If the investor wishes to delve deeper into the technology, she can do so in a separate session. The investor will give you the benefit-of-the-doubt that you can accomplish what you claim.
The investor is mainly deciding if the solution is feasible in theory.
