It’s no secret that entrepreneurs need funding to launch or grow their nascent companies, and some will seek the support of venture capitalists (VCs) to fulfill their ambitions. For many entrepreneurs, myself included, pitching to potential investors is far from an enjoyable task; at times, it can even appear to be a wasted effort. According to this report, venture capitalists provided $29.5 billion in funding to 3,382 businesses in 2013, so they have earned an unfortunate reputation as a necessary evil in the startup world.
Part of the problem stems from the fact that aspiring entrepreneurs, particularly first-time founders, don’t know how to engage or attract potential investors. Inexperienced entrepreneurs employ a blanket approach by giving the same rehearsed spiel to any venture capitalist who is willing to listen. In the end, nobody wins.
My current company, Retention Science, is my third business endeavor, and through the course of raising money for three companies, I learned firsthand how arduous and difficult the fundraising process could be. But it doesn’t necessarily have to be the case. The negative stigma associated with securing funding isn’t a given; it doesn’t have to be a nerve-racking ordeal, and it certainly doesn’t have to be a perpetual disappointment.
I’ve learned a few key tactics that can prove invaluable when pitching a company to prospective investors.
Don't Talk To Everybody
Contrary to popular belief, it’s not wise to pitch to anybody who will listen (though it is understandably difficult to say no to meetings). Your time is just as valuable as the VCs and you should only meet with VCs who specialize in your field.
It is also critical to identify the right partner to pitch to within a VC. Every partner has different investment interests, styles and seniority within the firm. Start by targeting ones who are most likely to be interested in your company.
When I started Retention Science, we listed ourselves on AngelList, a popular funding platform for startups, and received around 25 intro requests, but we only took meetings with a select few that made sense for our company. For instance, I met with Katherine Barr at Mohr Davidow Ventures because of their proven track record with successful B2B enterprise companies like
Look Into Your Own Network
One way to filter the investors you should meet up with is to target people who you already know, either directly or indirectly. After all, it is much easier for VCs to take an aspiring entrepreneur seriously when introduced by someone they already trust or know.
For instance, Andy Rankin, one of our earliest Angel Investors, introduced me to Kirsten Green, the founder of Forerunner Ventures. At the time, I wasn’t actively seeking capital, and I had instead hoped to be given the opportunity to work with her impressive list of portfolio companies, including Bonobos, Warby Parker and Birchbox. As we continued discussions, however, Kirsten realized that many of her commerce-based portfolio companies had the exact same needs that Retention Science was addressing.Our conversation quickly shifted away from a sales angle to a fundraising one because Kirsten was interested in being a part of the company. The shift was very serendipitous and natural once we realized that we'd be great partners with each other. But if it weren’t for the initial connection by Andy, we'd have never met Kirsten in the first place.
Research, Research, and Research More
Pitching to investors involves making a personal connection and telling a story they can relate to from their own investment experiences. A successful pitch is not only about the idea; it is about helping the investors to see your vision, size up the market, and, most importantly, foresee a profitable business model. Assuming you already know everything there is about your industry, make sure you thoroughly research everyone you will be speaking to so you can identify ways to connect on a personal level.
Whenever I confirmed a meeting with prospective investors at VC firms, I would thoroughly research all the partners who I might speak to. I familiarized myself with their previous investments, their philosophies, and their
By the time I actually arrived at the meeting, I was able to modify my pitch to reflect the specific investment and professional experiences of the partners who were present. By the time I pitched for Retention Science, I convinced four partners from Mohr Davidow to sign on with us within a 24 hour span, the quickest turnaround I’ve ever had.
Be Yourself
When pitching to investors, it can be all too easy to revert to a façade of no-nonsense professionalism. However, it is important to remember to be yourself and to act natural. After all, as much as partners invest in an idea, they also invest in people.
As the saying goes, you are only human, so relax. It will make it much easier to demonstrate your knowledge of the problem you are trying to solve, your expertise in the market you are trying to enter, and your genuine excitement to create a viable, profitable solution.
Investors are trained to see through the “smoke and mirrors” of superficiality. They are generally good judges of character regardless of how you present yourself. So the best bet is to go into a meeting as yourself. An advisor once recommended that I pitch myself and my business differently to compensate for my youth and my enthusiasm, which, I was told, made me seem inexperienced and desperate. I tried to modify my actions accordingly, but in the end, I realized that I wouldn’t want to partner with an investor who wasn’t willing to work with me as I am.
You Can't Control Everything, Such As Timing & Luck
Timing is everything in life, and it no different for fundraising. The outcome of many interactions with investors will hinge on the timing of the meeting. Some factors are beyond your control. If a VC just concluded a successful investment with a company similar to your own, they are more likely to look favorably on your proposal. But if they just came out of a lengthy board meeting, you may have difficulty capturing their full attention. Though you have no way of knowing an investor’s state of mind, you can at least do a little casual probing to gauge their mind frame before you launch into your pitch, and adjust accordingly.
There are some factors that you can control. If a VC gets in touch with you about setting up a meeting, be prompt to respond. You’ll be more likely to guarantee yourself an optimal time slot. Also, make sure to show up earlier than your meeting time. With luck, you may be able to snag a few extra minutes of time to pitch your company.
It is also critical to remember that VCs are generally busy people with jobs and lives outside of their meetings, so it will likely be difficult for them all to gather in a single room and agree to place their money in a certain company. The decision-making process is often delayed, so remain patient. At the same time, while persistence is always good, avoid resorting to obsessive emails or phone calls, which can quickly morph into annoyance.
Follow Up and Perform Due Diligence
Fundraising is not rocket science, yet many entrepreneurs drop the ball when closing a deal. Remember that a verbal commitment is not the same as a signed agreement, so keep working with your partners until the money is in the bank.
Until the partnership is legally finalized, make sure you attentively and directly answer all of the requests that come your way—investors take everything into account when forming their impression of you, and they are probably taking notes on how well you respond to their additional requests when handling the final steps of the fundraising process. Expect to receive numerous follow-up requests of all types, and respond to them in a thorough, timely, and professional manner.
Final Thoughts
Fundraising has developed a negative stigma, possibly because entrepreneurs see it as a necessary evil and a stressful ordeal. But it does not have to be the case. Fundraising involves more than just securing financial support – it also entails working with the right partners who can take a company to new heights. So rather than fear the process of raising money, cherish the learning experience and revel in the opportunity to make new connections.
Though it may sound cliché, fundraising is much like getting married. Your partner provides not only financial support; they also lend you their expertise, time, and invaluable advice. Our investors at Retention Science visit our office frequently enough to be called honorary team members, and having them around constantly reminds me that they are so much more than sources of capital. When you can feel that way about your investors, you’ll know you’ve made the right partnership.
