About the Author: William Fisher, a partner at Treetop Ventures in Omaha, is a regular guest contributor to Silicon Prairie News. In his series, View from the FishBowl, Fisher calls on his experience as a business executive and technology investor to lend his advice to entrepreneurs in the Silicon Prairie.
For Fisher’s bio, including a listing of companies he has been or is involved with, visit treetopventures.com.
Contact Fisher at fish@treetopventures.com.
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When pitching venture capitalists, William Fisher says, it’s especially important to present your team members’ passion and skills for building a business. Photo by Raphaël Labbé via Flickr.
I have been asked a number of times how to create the perfect pitch. Young (or old) entrepreneurs want the template that will result in funding with the fewest number of steps and the minimum amount of time. After all, we all want it now … and we want it with whipped topping and nuts.
Although I am not the brightest, I am pretty sure that if there was a perfect template for the perfect pitch it would have already been published and by someone other than me. So, it probably doesn’t exist and therefore the perfect pitch is the one tailored for your audience, the company you are creating and recognizes the outside elements that can affect funding (there are a lot of these) plus its simple to understand and follow.
Therefore, keys to a good pitch are:
- Know your audience and what triggers their interest
- Be knowledgeable about the company you are creating and the industry it is in
- Follow some simple rules to put together the pitch
So, from my perspective, here is the way to create a good pitch taking into account all of these items. My next few posts will take a good look at these three items.
Know your audience
First, let’s consider the audience. You may be seeking funding from a strategic partner (this is typically someone who is in an industry who can utilize your product but doesn’t have one like it; could also be a vendor that will benefit from your product being available) or from one of the great commodity providers of cash (VC firms). To be effective, you need to think like the people you are pitching to. This will take some effort on your part to understand more than just the surface information but it will pay off.
Strategic partners
Strategic partners (think of the airlines that Gordon Whitten pitched in order to get Sojern up and running) are looking for things that will make them a better company. Sojern pitched that their customers would benefit from more information about their destination and this would come at no expense to the airlines since Sojern would do the work to create the product, attract the advertisers and generate the revenue that would be split between them and Sojern.
At the time, the business climate was such that incremental revenue for the airlines has utmost in their mind and allowed them to overcome the issues with a startup company. This is the case of Gordon recognizing a need and presenting it to the right audience (senior execs at the airlines) at a time where ancillary revenue is at their top of mind and doing it in a way that takes the emphasis off of the company (startup in Omaha that didn’t know much at all about airlines or advertising). Great pitch! Airlines ended up with equity in Sojern and Sojern ended up with five-year exclusive contracts (you can raise money with that and they did).
Venture capital firms
Commodity providers of cash (I like to call VCs this as it both aggravates them and also makes them tell me why they are different from the other providers of cash) look at each opportunity through a different set of lenses.
They typically look for the three M’s (market, management and momentum).
- Market size of the space you are looking at
- Management team – passion, intelligence, logic, experience
- Momentum – do you have it or can you figure out how to get it
They want to invest in a market big enough to allow for a company to get to the $100M size in revenue and still have a relatively small share of the market. This is where they like to exit and hand over the business to someone else to leverage it and take it to the next level. If the opportunity you are chasing isn’t in a big enough market that you can easily articulate with enough proof points to make them believe, you will have a tough time no matter how crisp the pitch is. Spend time digging for enough market data to “put them to sleep” on this issue.
Next, they look at the team and whether they feel comfortable they have enough passion and skills to take their money and build a business. It isn’t that you have to have the team before you talk to them. However, if you don’t have the team, be clear that you understand that and want their help in filling out the team. Worst thing you can do is tell them that although you have never built a business like this and really don’t know much about sales channels or IP, you and your friends that worked at ABC Anything, Inc. can get the job done. Think about how credible your pitch is. My partner Tom Boje keeps telling me that if we decide to buy a bank, let’s also decide to hire a banker rather than try to run it the way we think a bank works (yikes).
Of course, they will feel that the place to hire these people is where there are lots of the running around (Silicon Valley) and will inquire as to the flexibility you have to relocate the company to their neck of the woods. Best thing to do is to keep your options open. I remember a story where I was trying to get someone to think about relocating to Omaha. His opening salvo was that his wife would not consider moving under any circumstances. I asked him whether or not she might for a $1M signing bonus. He glared at me intently and said, “Well, of course she would.” I just replied, “OK, now that I know you would move under some circumstances, we can proceed to discuss what we are looking for and what we have to offer.” We ended up hiring them, they moved and I don’t think they would ever leave Omaha. Idea here is to not say no to the VCs; keep your options open and there is a time where you will have to declare and it may be that Omaha (or where ever you live, is OK).
Finally, they look at your momentum and this is something that is subjective based on what needs to be done and how far you have moved the needle. Key points here: is the team committed?
I am amazed at how many pitches I see where the management team has put in next to nothing other than their time and want someone else’s money to build our the alpha product or so the first couple of customer installs. If you don’t believe and show people how much you believe, then you need to understand that this will be easy to spot. Unfortunately, my office window looks out on the parking lot and it always amuses me when the entrepreneur arrives in a nice BMW and is sporting a great watch and explains that he and the team can’t get the $100k to advance the company to the next proof point. This is a clear message; you aren’t sure it will work and you want my money versus yours to see if it will.
The other thing about momentum has to do with the size of the fund raise. You may need to raise $5M to get your company all the way to a full sales force and a built out product set; however, look out 18-24 months and see how much capital you need (maybe only $2M) and focus on that number and be willing to bet that you can show momentum to your investors and raise the incremental $3M later at a higher valuation. This is tricky because the investors want to buy at the lowest price possible but they will actually look at this positively if your position it right.
So, if you digest this and understand the macro level logic of any audience, now you are ready to go to the next step. This still isn’t creating a pitch … that will come later. This is the work you need to do to get ready to prepare what you hope is the perfect pitch.
By the way, the only one I ever did was the one that I pitched to my wife to marry me. It had to be perfect; all I had to offer her was promise of delivering down the road. Sort of like getting a VC to invest; get married and then the hard stuff starts.
