4 Ways To Ace Your Venture Capital Funding Pitch

Writer

Kait Smith Lanthier

Kait Smith Lanthier is the Director, Content Strategy at Babson College and the Managing Editor of Babson Thought & Action. Her writing has appeared in print and online in a variety of outlets including USA Today, Yahoo Shine, YourTango, CosmoGirl, and First for Women magazine. Smith earned her undergraduate degree in journalism and graduate degree in integrated marketing, both from Marist College.

October 24, 2016

Listen

Ideas are a dime a dozen. It’s a harsh but true reality, especially for entrepreneurs seeking venture funding. In a world with millions of ideas, many of which are the same, why should a venture capitalist fund yours?

It’s one of the many questions founders must answer in order to successful pitch to VCs, who sometimes hear thousands of pitches in a single year. Successful pitches rely on powerful storytelling, strong presentation skills, and yes, a killer idea. But, beyond the idea and the flair behind it, there are critical details VCs look for in evaluating a pitch—and whether a company is worth the investment.

1. Keep It Simple

“Make your pitch simple. Really, really simple,” says Richard Moran, president of Menlo College and former partner at Venrock, while speaking with students at Babson College. To illustrate his point, Moran told the story of Zeltiq, a venture that won over investors—including Moran and the Venrock team—with one phrase: “Our technology eliminates love handles.”

It was simple but attention-grabbing line that highlighted Zeltiq’s big idea—a noninvasive “coolsculpting” procedure that eliminates problem-area fat—that led to sizable investments from VCs, and even more sizable returns down the line.

2. Highlight the Team

When VCs evaluate a venture, they aren’t just critiquing up the idea – they’re considering the team behind it, too. They’re looking at the skills, work history, network of founding teams to determine how successful the venture can be. Moran says VCs will look for patterns in an entrepreneur’s background that indicate success.

“Have you been successful before? Have you failed before? Did you have a good idea before?” he says. “What in your background is a predictor that indicates something good might happen if there is an investment?”

Even more, they’re looking for entrepreneurs who listen.

“They’re looking for someone who is coachable,” says Andrew Zacharakis, professor of entrepreneurship at Babson College. Investors bring experience to the table, and if they’re financially backing a venture, they’ll want to know entrepreneurs are looking for advice and guidance on how to move a company forward.

The key to communicating coachability lies in how you pitch. “Be open and honest,” says Zacharakis.

3. Tell a Compelling Financial Story

It’s no secret that investors will use financial information and projections to evaluate a venture. Data such as sales forecasts, profit and loss statements, and unit economics will help paint a picture of the future of a venture, and the potential for financial return for investors. When preparing financials, Margo Layton Cole, associate at Breakaway, advises entrepreneurs to be realistic but compelling.

“Use assumptions that ground these numbers in reality, but don’t be so conservative that you’re putting forth a financial picture that isn’t exciting,” she says.

This advice is particularly important for female entrepreneurs who, in Cole’s experience, tend to be more cautious with financial projections. When comparing pitches from men and women, Cole found projections from male entrepreneurs to be, on average, five to nine times higher than women’s.

An entrepreneur who presents an unappealing financial picture is doing themselves a disservice, she says. “At the end of the day, investors are looking for financial returns. It’s critical you show them a clear path from day one.”

4. Flip the Telescope

Not all investors are wowed by a business plan or a telescope. Woody Benson, Venture Partner at Launch Capital, says he is more impressed with ideas, passion, and thought. But his number one piece of advice for entrepreneurs is to flip the telescope.

“Try to put yourself in the investor’s position,” he says. This includes explaining why this venture is a win for the VC. “What’s in it for the people writing the check?”

Angelo Santinelli, startup advisor and adjunct professor of entrepreneurship at Babson College, echoes that sentiment. “Entrepreneurs focus too much on selling the idea rather than how they can solve a problem or create an opportunity for an investment group,” he says. “Too much focus on developing a plan for the sake of a plan. Just tell me about your business.”