I thought that this will be a very interesting topic as I am now on the mission of finding 50 ideas and creating 50 startups in 2010. Many of these startups will, in one way or another, be looking for investors. This will be a good tip for them, having been a VC before. As an ex-VC, I have sat across the table listening to business pitchings. The lessons learned are what I have summarised below. Enjoy and do tell me whether you agree or disagree; or if you have anymore to add to the list, I will be most happy to. Enjoy!!!
1. Do some research on your potential investor
Find out what he/she is interested to invest in. For VCs understand at what stage is their fund maturity. Most VCs have a 5-year fund life and if they are already on a late stage of the fund lifecycle, very likely that they will not be interested in early startup proposals. Find out early. Talk to them.
2. Find out what rings their bells
Part of your research in #1 should be to identify their current priorities, as well as the deeper motivations of the particular investor.
3. Entry into an emerging field is a huge advantage
Investors are attracted to projects of emerging industries as being an early entrants, although risky, but yield higher returns once the investment is realized.
4. Don’t do too much research on your project – get started
Investors are not interested in projects that are still undergoing research. They want projects that can be realized fast.
5. Work on your business plan
Have a compelling business plan. Make sure you plan your business well with a compelling business model and business plan. Nail down the key value proposition and make sure that it makes sense to the investor. Investors are responsible towards their stakeholders and therefore expect a high return on investment. Therefore, make sure that your business model factors in their responsibility.
6. Be persistent
Persistence pays! Even if you are rejected, do continuously update these investors on your project. When they are ready and when you fit into their investment profile, they will look for you first.
As in #1, do pay visits to their office. More often, they will welcome you as they too want to know on any updates about your project. Build relationship with them. Make them your best friends. You’ll never know when they will be ready to look at you and when they do, you will be the first as they prefer to work with those whom they already know.
8. Go to Conferences
This is where you can meet most of them.
9. The 1st minute
The 1st minute of your presentation is most important. It will make or break your potential to secure an investor. Make sure you are prepared for an elevator pitch of a lifetime!
10. Assume nothing
As in #6, when you visit, update them or even be persistent in promoting your project, assume nothing. Concentrate on building relationship with them. When you are invited to present your project, assume nothing. Most likely those that are in the room were roped in at short notice and may have never seen your document before; or may have little knowledge about the subject matter. So, be prepared with multiple copies of your documents as hand-outs. Be sure to get their business cards.
11. Be flexible in early stages
When you talk to your investors, allow some room for definition or modification of your valuation, amount requested, project scope and so on. This will allow them a wider entry point. A lot of times, entrepreneurs tend to ask for hefty valuation or PE ratios when basically, as a startup, they have nothing much to show except for future projected earnings. At most times, when I sit in VC pitching sessions, entrepreneurs tend to ask for hefty valuation when in actual fact, they could not even justify their valuation.
12. The CEO should always be present
I have seen a few times when the CEO was absent during VC pitching. This give the company a very bad image and projects to the investors that the CEO is not interested in their money at all. Investors want to know who is running the company and in most cases, they look to the CEO to understand his leadership style, direction and more importantly, whether they can work with the CEO should they invest in the company.
13. Don’t take “NO” for an answer
More often, we tend to give up when the investor says “no”. In fact, take the opportunity to engage with them and find out where you have gone wrong. As in #6 and #7, continue to write and visit them.
14. Never blame the investor for not understanding your business
Many a times, it is the entrepreneur that fails to make them understand their business model. This is why #9 is very important.
15. Develop a thick skin and enjoy yourself
You will get a lot of rejections than acceptances. Don’t take it personally or let it discourage you. In fact, you should learn from their feedback. Each investor that you meet will indicate to you what he/she is looking for. By learning, you will be able to improve your business model and presentation better.
16. Always be available for any Venture Pitching sessions
Inspite of all the rejections, make yourself available for any venture pitching sessions. They are good sounding boards for you to improve your business. Venture Pitching sessions are not a waste of time. You will continue to improve and one day, you will get their attention.