You may think it’s your idea that will win financing, but in reality, it’s you who will make or break your pitch. Where the written business plan was important seven years ago, today venture capitalists are investing earlier, before a plan has been created, so the verbal pitch has become critical. Jerry Neumann of Neu Venture Capital says, “In early stage, we’re investing in people who can build something.”
While hearing dozens of pitches a week and thousands a year, VCs are looking not for reasons to invest but for reasons not to invest. Communication can be it, and for good reason. Investors need to know that entrepreneurs can sell their idea. They want to see if they are likable, whether investors would want work with them for the 10 years it can take to take to build a business. Neumann says that “to an investment banker the relationship (with a business) is a one night stand … to a VC, it’s a marriage.”
Here are 3 “Cs” to get a VC to say yes:
Confident (not Cocky)
“You don’t have to go crazy and dance on the table but don’t just read slide after slide. If they aren’t excited it’s hard for me to be excited,” says Hrach Simonian of Canaan Partners. Confidence means comfort with themselves, their subject and the competition. In fact, he warns, “Don’t omit the slide on competition. Everyone has it.”
While confidence means showing passion for your idea, VCs say you have to maintain flexibility. Simonian says the worst pitch he can remember is “when we got into an argument about the facts.” A lot can change over time and VCs have to believe founders can adjust, to say nothing of the fact that a dispute mid- pitch doesn’t leave them feeling warm and fuzzy about working together over the long haul. Neumann says his pet peeve is an attitude that says, “‘Here’s the pitch. Write me a check. Arrogance works in corporate America, but not in startups.”
Taylor Greene of Lerer Ventures says the best entrepreneurs are able to deliver a concise pitch. He says his team always asks them to pitch ideas in one sentence and only about half can on the first try. Developing the “elevator pitch” is important because it crystallizes what they are doing, why they are doing it, and why they can do it better. But don’t think that concise means leaving out an example of how a product will work or make life better. Neumann says too often founders focus on the technology or the how they came up with an idea versus how it will be used. Stories make it meaningful and memorable.
Keegan Forte a VC at Bowery Capital says while entrepreneurs can and usually do have slides and/or a product demo, she doesn’t want a super slick presentation with fancy slides. In fact, that makes her wonder how they are spending their money. Keegan wants a conversation, the chance to get to know the entrepreneurs and their business. Neumann agreed, adding that “[y]ou want give and take to see that they understand the problem they are solving.”
As in any conversation, there can be challenges. Simonian says you don’t have to have all the answers, and to avoid getting defensive. That’s where Forte says women especially need to prepare. The VC world is dominated and pitched primarily by men. If a woman comes in with an idea that doesn’t involve cooking or cosmetics, Keegan says “[t]hey may come at them hard.” A recent study by Harvard/MIT/Wharton researchers found VCs prefer pitches given by men even when they were reading a female entrepreneur’s script. Almost 70 percent found men more persuasive, logical and factual.
While researchers don’t know the reasons why, as a communication coach I believe women can get rattled more easily when up against the ropes. Forte’s advice? “Stay inside your head. Leave others out. You know your business. Don’t let them think you don’t.”
Also, here are some tips to avoid appearing defensive:
- PAUSE – Don’t say the first thing you think when challenged.
- PLUS – Invite elaboration with phrases such as, “Say more about…” This ensures a pause and people often back down a bit when they see you are open to discussion.
- PLAY IT COOL – Your face should say “I’m considering.” When you respond, speak slowly and in a lower tone. This does not, however, mean you should change your position.