Last week I was having a conversation with an entrepreneur about the most common mistakes entrepreneurs make when meeting with investors. One of the biggest keys we talked about was to make it a conversation, not a pitch. Then a few days ago Fred Wilson wrote a blog entitled “The Conversational Pitch” in which he explains why he likes it when entrepreneurs don’t use a deck. It’s always reassuring when one of the best to ever do it has a similar viewpoint. So, I thought I’d share the rest of the advice I gave that day so that other VC legends don’t steal my words of wisdom ;)
1. Know your audience — not enough entrepreneurs do their research ahead of time and it’s a shame. It can pay off in a big way if you spend a little time and know who you are talking to. What companies and industries have they invested and looking to invest in? What stage of company do they typically back. What hobbies or interests do they have? I’m sure there is a lot more you can find out as well. It’s usually not too difficult in this day and age. Beside the company website, there are so many other sources of info including Crunchbase, Twitter, LinkedIn, blogs, etc. But the best source is probably other entrepreneurs who have pitched that investor or that the investor has backed. If you can talk to one or two people they can often give you an idea what is likely to peak their interest.
2. Create a conversation, don’t give a pitch — Don’t take my word for it, listen to Fred. Your goal isn’t to get through all your slides, your goal is to get the investor engaged and interested in what you are building. I know you spent hours and hours perfecting your slides but I’m not going to fund you based off your PowerPoint skills. I want to get to know you, be able to bounce around from topic to topic, and drill deep in certain areas. Slides can be great support but you, the entrepreneur, need to be the star of the show.
3. Explain why you — Too many entrepreneurs want to tell you about their product and what they have built but gloss over what unique advantage they, as individuals, bring to the market. Yes, almost every deck has a team slide with some logos on it but that alone is too superficial. I want to know why are you doing this? What experience led you to forgo a high paying job somewhere else and start a company? What insight do you have that no one else has figured out yet?
4. Keep it simple at first — You have to remember you live and breathe your business every day. We might have just recently met you. You know every detail about the product, the market, and where this is all going. We are only seeing your business for the first time. Thus, you have to make sure the investor clearly understands what it is you do at first, especially if you are in a new market. I know simplifying the message initially often times frustrates a lot of entrepreneurs because they can’t wait to get into more detail. Believe me, as an investor I want to go down that rabbit hole with you but we can’t do that until we have the basics first.
5. Ask the investor questions — As much as the VC is doing diligence on you, you should do the same on them. Don’t be afraid to ask about their process and how they make decisions. What is their reserve coverage policy and where they are in their lifecycle of their fund? Make them explain what they can bring to the table beyond simply money, who they like to invest with, and who are some entrepreneurs they have worked with in the past you can speak to. When done right, asking insightful questions not only gives you more information about the investor, but can give you an extra degree of sophistication in the eyes of the investor.
While every investor is different with regards to what they look for in an investment, these guidelines will prepare you and give you the best chance at success for most meetings.