If you’ve been invited to pitch to VC investors, chances are you’re focused on preparing your pitch. There’s no doubt you should invest a significant amount of time in doing this, whether you’re working on a comprehensive pitch deck or getting ready to pitch without slides.
However, in doing so, we see many founders fall into a trap. They forget that the pitch is far from the whole story when it comes to securing VC funding. Consequently, they neglect other aspects of the founder-investor conversation that are just as crucial (if not more so). The result? They come away with nothing.
Here are the mistakes we see entrepreneurs make time and time again – and what you can do to avoid them.
Mistake 1: Failing to articulate the ask clearly
You’d be amazed how many founders get this wrong. Far too many go into a pitch without a clear “why”, “who”, “when” or even “how much”! Approaching a conversation with investors with an attitude of “I just need money” is a surefire way to get precisely nowhere.
Here’s what you need to communicate in detail – with headline numbers and maximum clarity – when it comes to your ask of investors:
● The amount of investment you’re seeking
● How you arrived at this number (be sure to include details of your burn, what it’s comprised of and your runway)
● Where the funds will go if you secure them
● Your timeline for using the funds
● Your contingency
Mistake 2: Failing to prepare for the post-pitch Q&A
Picture the scene: you’ve spent endless hours preparing your pitch and you deliver it flawlessly. You’ve stayed within the three-minute time limit and the judges’ applause gives your ego a huge boost. You open the floor for questions and then…it all goes horribly wrong.
This is the part of the pitch that so many founders forget to prepare for. Others make the mistake of thinking that they can answer investors’ questions simply by referring to their trusty slide deck.
Now, if you’ve put the work into your pitch, the answers to the questions that investors ask in the Q&A will almost certainly be in there. It’s a given that you’ll need to repeat the information in the pitch – without displaying any frustration or impatience – but you have to be able to show that you know your stuff without having to default to a slide deck or script.
You also need to be able to talk about your company and your bid for investment confidently, naturally and in detail, no matter how the investors frame their questions.
The good news is that the questions that investors will ask you are already out there. Just watch a handful of Demo Day videos and you’ll see that the questions are always the same.
Make a note of everything that comes up and once you’ve got your list, start developing your answers and then learning them.
To hit the mark, your answers should be simple, short and honest. Wherever possible, you should support them with a number. If you don’t have one you can share, avoid the temptation to make one up or attempt to provide an explanation. “We don’t have that number nailed down yet” is a perfectly valid answer.
Mistake 3: Failing to prepare properly for post-pitch
meetings
Now picture another scene: the investors like your pitch and you wow them in the Q&A. You’re delighted when they invite you to a follow-up conversation. You enter the meeting feeling confident and positive but leave with nothing. No encouraging feedback and no invite to that all-important next meeting.
So what went wrong? In all likelihood, you didn’t prepare properly for the conversation. Investors demand that you’re on top of your game in meetings, and that you know your company and industry inside out. At the end of the day, they invest only in the very best companies. So do your homework and make sure you can talk about the following areas (to name just a few) eloquently, with no hesitation:
● Your previous month’s numbers
● Your top three customers
● Your industry competitors
Many founders have learned the hard way that there are no second chances in funding circles. You’ll only get one shot with your dream investor – so don’t blow it!
Mistake 4: Failing to ask questions
It’s no exaggeration to describe the founder-investor relationship as a marriage of sorts. As a result, it’s vital for founders to due diligence investors, just as investors take time and care to research the founders and companies they invest in.
Ultimately, investors expect you to have questions. In fact, it’s highly likely to count against you if you don’t. After all, why wouldn’t you want to know more about a potential investor’s background or about the fund itself?
Here are some of the areas in which investors will expect you to demonstrate an interest:
● Their background
● Their achievements
● How they can help you
● When the investors set the fund up
● How many investments they’ve made so far
● Whether they’ve already received the funds they’re offering to invest
As part of your pitch preparation – and your preparation for any subsequent meetings — plan a set of questions that you can ask fluidly and naturally as the conversation unfolds. Don’t find yourself in the dangerous position of having to come up with questions on the spot.
Ready to learn more?
If you’re preparing to raise VC investment, we’ll teach you how to avoid these mistakes and countless more in our programme, the Fundraising Bootcamp.
It’s not your typical fundraising class. You’ll learn how to win investment for your startup or scale-up live, with coaching from those who’ve done it. Check out our upcoming cohorts and let’s see if we’re a good fit.
