As investors, we are always asked, “How can I improve my pitch?”. There are tons of successful ways to pitch VCs, but after reviewing thousands of them across the years in H20, we believe this 8-point guide to pitching VCs might mentor your fundraising road. In Chapter 2 of our Founder Tip Series, we have decided to give a high-level overview of certain relevant pitching mechanisms that we believe might help you during your fundraising process.
1. Begin conversations with VCs months in advance of fundraising to build relationships and to give them time to track the business. Some key ways to keep an engaged relationship:
• Understand what each VC´s investment thesis is
• Send monthly updates to have them fully updated on traction and product
• Schedule a follow up call after your first meeting. You need VCs to fully understand what is it that you are actually doing and how you are doing it. In most cases, one meeting isn’t enough to properly deep dive in the company
• Be prepared to share more information. Have your data room constructed on a general level and offer additional information if needed
2. Be precise regarding what your market is and what problem you are trying to solve
• For any company in particular, market size is really important. It’s important for VCs to make sure VCs have full understanding of your market and why it´s an interesting opportunity
• Understanding the problem is probably one of the most important aspects you need to ensure the VC understands. This is the fuel behind building your business. Always understand the problem really well and how other solutions might be attacking the same opportunity
• When explaining your solution, break it down in the simplest way possible. This is essentially what the VCs are going to remember and if they don’t understand it fully, they will not be able to see through the full potential it actually has.
3. Focus on ensuring VCs understand how your business model works.
• Be explicit on how your different revenue streams work and don’t be shy to share any possible future revenue streams. By doing this, you will be able to share a bit about your product roadmap and make it clear to the VC how your business model is going to evolve over time.
• Give comparables in other markets. This shows VCs proof (in some way) that the model actually has worked in other geographies. It´s also important to understand what are these comparables’ key learnings from their operation and to analyze how your business model differs on your target market.
• Demos or use cases are really helpful for VCs to exemplify what you are building. Demos are usually the most common, but use cases can also do the trick
4. Understand and know what your competitive landscape looks like and how they operate.
• Clearly understand how you differentiate from your competitors. Some companies use a simple comparative table segmenting product features, general offerings, operational frameworks, geographical operations, fundraising rounds, etc. to give VCs a full understanding of what each competitor does.
• Analyze your competitors and look at possibilities where you might overlap in the present and future. By doing this, you will be able to ensure VCs that you understand what is exactly going on and where these solutions are going.
• Don’t only focus in tech-based companies, but also map out traditional companies that are solving your same problem and/or attacking your clients.
5. Why should VCs back your team?
• Emphasize on who you are, why you want to solve this problem and why are you the right team to do it. Essentially VCs are betting on the founding team, don’t sell yourself short!
• Focus on letting them understand why are your peers important to you and your company, how do they complement you and what are some key roles you still haven’t been able to fill.
• Share any advisors or investors you have worked or that have helped you out. We understand everyone needs help and we value how you leverage on these insights.
6. Focus on having a clear roadmap in terms of business and product, as well as a well-structured operating plan
• This is the opportunity to communicate your vision for the company and how you plan to achieve it. It is important to emphasize what your operating plan is in order to reach these milestones. Breaking it down in different phases is a helpful tip to get the message across
7. Be precise on your current fundraising plans and what are the main milestones you want to hit with this capital.
• Be clear on what are the terms of your current round (how much capital are you raising, what is the targeted valuation, timing, etc). The earlier VCs have a clear understanding of your fundraising strategy, the more efficient the process will be, as they will immediately understand if your company is thesis fit regarding these terms
• Emphasize on what your milestones will be with this round to understand how you are going to scale moving forward and what are some results we should expect/project.
• Don’t be afraid to dream, share what your ideal cap table would be, why you would like to have certain players and what you’re searching from a VC partner
8. Set clear goals to follow up on next steps.
• In order to understand what is the best way to follow up on your conversations, its their process looks like, their time frames for each step of the way and always be open to sharing additional information
• Send recurring updates not only regarding how traction has been evolving, but also what you are doing in product and operations to improve your results