1. How to pitch to a VC: Use your network
The phrase ‘it’s about who you know not what you know’ is still alive and kicking for VCs and for most the best way to get VC funding is to get recommended.
“I get referrals from people that I trust so in that sense, there is no science to it, it’s more of an art,” says Chen.
“If you don’t have a lot of brand recognition, it’s hard to get recognition with VCs. The first thing is not to see it as a transaction but to see it as building relationships,” Newman tells Techworld.
2. How to pitch to a VC: Understand VCs
Understanding not only how VCs work but the relationship you’re entering into is crucial to securing VC funding and making better business decisions.
“I think a lot of entrepreneurs don’t understand gravity of taking someone else’s money, then they wonder why investors have an opinion about things and get frustrated when you don’t react to their advice,” says Newman.
“If you want cheap easy money that isn’t going to start a clock ticking down straight away, don’t go to a VC,” adds Newman.
3. How to pitch to a VC: Have a deep understanding of your field
Any business pitch, interview or presentation can fall apart of you don’t have a strong understanding of your field. This is the same for VC pitches.
“The biggest turn offs are those that you can tell don’t have depth or understanding of the space. Maybe they’ve read a few articles about the space and got excited about it but at the end of the day, entrepreneurs fail because they lack depth,” says Chen.
“If they lack a depth of knowledge of their particular space [startups] don’t even know why a VC is not interested in them,” he adds.
4. How to pitch to a VC: Be authentic
Unsurprisingly, VCs receive a lot of pitches and will see though any startup founders that lack enthusiasm in both the pitch and the business.
“I think the better pitches are thoughtful and take an interesting perspective on things. That’s always a good starting point,” says Chen.
“Great investors are generally great readers of people. They have excellent bullshit detectors and excellent pattern recognition. You know when there’s not enough data and too much story,” says Newman.
“I’ve sat in meetings before where an entrepreneur is talking and I’m 20 minutes in and I think, I don’t care if you’re going to be a billion dollar company, I don’t know what you’re saying and I don’t click with you,” he adds.
5. How to pitch to a VC: Present your past experience
Like going for a new job, startups should make sure their experience is highlighted and they supports your pitch throughout.
“One of the first things we do is look at their experience. Are they credible? Not only should they have a big vision but can they do what the actually say they can do?” says Chen.
6. How to pitch to a VC: Be concise and only mention what’s important
Keeping things simple is the best way to put your point across and secure the respect of the VCs you’re pitching to.
“If you can’t express what you believe in one or two lines in a clear way then you probably don’t understand it, you don’t understand the problem, you don’t understand your own product and you don’t know how to get it to market,” says Chen.
“Investors know when they’re being told what they want to hear. You have to cut out all of the fluff and just get to the data points that are going to matter.
“So do you have real proof that you have a product fit for market? Tell me why your team is awesome, what you’ve done together, how much progress you’ve made and in what period of time and if you have any clue what leverage you’re going to pull at each round of funding,” says Newman.
7. How to pitch to a VC: Know your competitors
Separating your startup to the countless others being pitched to VCs will highlight your understanding of not only your business model but of others, and will be a great way to prove to the VC why your startup is better.
“You get a lot of the same pitches so then you have to ask them how they are different from others. And if they can’t explain that then that means you don’t have enough depth of knowledge of your competitors, what others are doing in this space,” says Chen.
8. How to pitch to a VC: Consider a video pitch
A two or three minute video will be light relief for VCs and break the cycle of long pitches.
“Videos are an easy way of communicating what you’re doing to the VCs. If you think about it I might get 25 pitches a day and if I were to be fair I can only spend about 5 minutes on one so that’s over three hours a day on new companies and only just to see if I should spend more time on them. So that one line or two minute video explains what you do, what you problem is and what your solution is,” says Chen.
