I recently had the privilege to be a VC panelist at the Executive MBA Program at a very fine, local university. Besides being quite impressed with the very high quality of the students (maybe the down economy has forced only the most serious and committed students to enroll), there were a few reminders to me of some of the "unwritten" rules of a venture capital pitch.
While I confess that my experience is primarily through the lens of an entrepreneur's eyes, given that I have some background (past and current) in the investment community, maybe I can talk "entrepreneur-speak" and bridge this knowledge gap! And while much of this is simple, common sense knowledge (and divulging these "secrets" won't get me blacklisted with the VC community and force me to go into hiding like Salman Rushdie), some of these are easily forgotten or not fully respected.
1. Prove Your Concept - You may think a technology or an idea will work, but until YOU have actually done it yourself, how do you really know if it will work? Did you do it for someone else inside of a bigger company on somebody else's nickel? Can you do it for yourself successfully AND profitably? Is it profitable enough (not just gross margin but the overall size of market and total $$$)?
2. Bootstrapping is OK - Can you make your plan work with less money? How about no outside investment? Many people have the notion that they should ask for more money than they need because they have heard VC's prefer to write larger checks as the due diligence is the same. While somewhat true, if you can do more with less, ultimately it may serve you better financially and demonstrates the talent and will to win that the right team can have in place. Know how much money you really need - and be prepared to explain it clearly!
3. The Devil Is In The Details - There are many different ways to evaluate the merits of an investment opportunity and the team, but if you are sloppy (appearance), late (unable to manage time), lax (not putting enough effort into a deal, term sheet or pitch book, etc) or other issues, what is it going to look like when you have your money from us? I have seen projections as part of an overall business plan in which it was very apparent that the author simply "drug" the numbers across all time periods....I would venture to guess that your cost of goods sold will not remain the exact same number over a five year period. Guess if you have to, but please do not take the lazy way out just to really give me a glimpse of what our relationship will look like after we invest!
4. ALL the Pitches Start to Blend Together Sometimes - Please remind us which company you are, what your company does and other relevant details when we talk. Until the VC and the entrepreneur seeking funding are on a first name basis for children or spouses, many investment opportunities start blending together. That also includes putting reminders on Power Point slides, business plans and materials. Help us remember you.
5. Can you clearly explain what your company does without the fluff? - If you could not explain what your company does to an 8 year old, then you may need to refine your focus. Mission statements that are heavy with jargon and buzz words become very vague sometimes the more words used. Clarity is king. Remember that while no one else may know more about your company than you, be sure to keep it clear and you do not have to share every detail. Just the facts please! No fluff needed!