There’s always a lot of talk about how startups can improve their pitches to VC’s, yet there is noticeably little chatter about how VC’s can improve the pitch process with entrepreneurs.
From an entrepreneur’s standpoint, I’d say most VC’s are awful at managing pitches.
After starting nine companies and sitting through countless pitches to VC’s, I can tell you the approach to pitch meetings by VC’s vary greatly. There’s a reason companies like Sequoia and Benchmark get so many great deals, and it’s not just because of whom they’ve backed • it’s also because of how they approach the pitch process.
Fortunately it doesn’t take much to improve your pitch process. It’s really just a simple reminder of a few basic principles of managing entrepreneurs and the process at large.
Assume I Haven’t Done this Before
As a VC, you sit in a conference room all day listening to startup pitches. You know how the process works and you know what you should be doing. The entrepreneur, on the other hand, probably has as much experience pitching VC’s as you have experience pitching fast balls for the Yankees.
For this reason, the VC’s get frustrated when entrepreneurs don’t get to the point, can’t deliver their value proposition, and generally deliver a bad pitch. They assume the company isn’t well put-together or the Founder doesn’t know what he’s talking about.
As the entrepreneur, I need you to assume I haven’t done this before, because I probably haven’t. Assume that you’re going to have to spend some time setting your expectations for both the presentation and the flow of the meeting itself in specific detail.
I distinctly remember getting emails and calls from Bob Kagle at Benchmark prior to our Swapalease pitch. He wanted to make sure we knew exactly how to prepare ourselves and what his fellow partners would want to know. Although I had pitched investors before, Bob made it a point to be sure we were in sync well before the meeting.
Just Tell Me What you Want
No entrepreneur should have to guess the agenda of a pitch meeting. The format and topic points should be spelled out clearly by the VC in exactly the manner they want to be pitched in. Leaving an entrepreneur to his own devices in creating his pitch deck is a recipe for disaster.
Of all of the VC’s I pitched, Sequoia was one of the few companies that sent me an actual overview of exactly what they wanted to see. When the partner’s meeting started, our agenda ran like clockwork since everyone in the room knew exactly what needed to be covered in a format that everyone could easily digest.
Entrepreneurs are more than willing to craft their pitch around the needs of a VC. If you tell me you need the pitch painted in water colors, written as a haiku, or chiseled into a marble slab, that’s exactly what you’ll get. My interest as the entrepreneur is to make good use of your time, not wander aimlessly hoping to find your interests.
Just Say “No”
VC’s have an endless vocabulary of lame euphemisms for saying “no.” They use tired phrases like “this sound interesting” and “this is something we’re considering.”
What they can’t seem to use is one simple word • “no.”
I’m well aware of the need to maintain a relationship with an entrepreneur even when you aren’t ready to make an investment. Heaven forbid you say “no” and six months later the company takes off without you.
Yet you don’t need to avoid the word “no” in order to build a relationship. When Sequoia and Benchmark needed to say “no” they were able to tell me in a matter of days, with very specific reasons why we didn’t fit their investing criteria.
Entrepreneurs can deal with being told “no.” It’s a part of our DNA. What we can’t deal with is being told “maybe” while wasting time and resources hoping that the answer might be “yes.” When it came time to start talking about my next project, the VC’s who could no use the word “no” came right off my pitch list.
Stay in Touch
What I would consider the single greatest testament to how great VC’s operate is their ability to treat entrepreneurs well even when the deal doesn’t happen. For every deal that doesn’t make sense today, there’s an entrepreneur that will be back with another one a few years later.
Surprisingly, of all of the VC’s that I’ve pitched, the ones that would presumably need me the least • the top tier players • seem to spend the most amount of time dropping follow-up calls and emails to see what I’m working on.
Take Responsibility
If you want to sit in more valuable pitches, it’s time to start taking more responsibility for the pitch process. As entrepreneurs, we’re smart people that want to make the best use of your time. But we can’t get every pitch right without a little help from the VC’s we’re pitching.
Wil Schroter writes a blog at Go BIG Nework.
16 Comments
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Sara Sommer said:
Wil -
Fantastic article! If all VC’s followed your advice, I think entrepreneurs looking for funding would be much more comfortable and confident in making their pitches. Kudos to Sequoia for outlining what they wanted to see out of your pitch. It’s the time spent considering the agenda that is often times most stressful! -
Ryan M. said:
Those are great points Wil. VCs get so bombarded by every entrepreneur on the planet that they wants to pitch them for funds. They can quickly lose sight of the need to maintain strong relationships with the handful of promising entrepreneurs that they do actually meet, but don’t fund the first time around. It’s simple customer relationship management. You don’t have to extend the same service to every entrepreneur that contacts you, but it will pay off nicely if you keep in touch with the folks that are building the next big startups that you’ll fund 2-3 years down the road.
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DC said:
Fresh perspective! VCs generally to come across as the ten thousand pound gorilla that can do no wrong b/c entrepreneurs need them to survive and prosper. It’s nice to hear from practical experience that the VC community itself could also benefit from a “tune up” now and then. Maybe you can share an actual agenda in your next post - just to ensure they get it right. Cheers.
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Brian C said:
Great article! It’s amazing how hard entrepreneurs can work to get their company in front of VC’s, only to fumble on the 1 yard line. I’d be interested to know what the VC’s think of the entrepreneurial pitch.
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David R. said:
Very insightful. Gives me a new perspective into the VC’s mind. I’d love to see the agenda for one of these meetings. Keep it up.
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Tyler said:
That article is exactly what VC’s need to know. The current process is unorganized on both sides and could be much more stream lined.
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Vlad said:
It’s amazing that the process has become so one-sided: VC’s are treated like deities and the entrepreneurs bow and kneel at every capricious impulse. Good business in most industries involves clear communication and respect for the other party. Your article brings to light a need for VCs to be more accommodating in those very ways. Many VCs need more insight such as yours - thanks for sharing!
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guy said:
I guess they don’t teach this stuff at Stanford or Harvard B-Schools. Clearly they should. Furthermore, how is a VC even credible without being an entrepreneur first? A VC is a salesperson and the best salespeople are good at relationship building not changing around their customers businesses. The fact is most VCs make poor decisions 9 out of 10 times. Not very good stats no matter how you slice it or dice it.
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Jeff Canter said:
This is a great article. It would be nice if people trying to do business together could be a little more honest and blunt in the process. As and entrepreneur, you shouldn’t have to waste time guessing what VC’s want see or have to wait on a yes/no answer. That time could be better served growing the business. Again, nice article!
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Joe Entrepreneur said:
GREAT Article. I am also working on my startup called Onista. http://www.onista.com
This article provides good info on which VCs actually provide information on what they are looking for. Pitching to VCs should not be like meeting on blind-date where you have no idea what to expect. -
John Hunter said:
I couldnt help notice that most of these replies came just minutes apart from oddly anonymous names. It almost looks like there is some self promotion….substantiation here.
I bring this up to question the shameless promotion of this articles author. I would like to know more about the outcome of these pitches to benchmark and sequoia as there is where the lesson is learned. I doubt any of these pitches materialized into a bonafide transaction. The point? Whether the VC knows how to pitch ‘the borrower’ or not is irrelevant….it will ultimately boil down to the integrity of the concept, plan or model.
Yes, any ‘borrower’ should know the banker they are meeting and the hot buttons. The banker however needs to do nothing….cash makes him king. The ‘pitch’ is not on the VC but on the ‘borrower’. We all know the old saying ‘beggers cant be choosers’ and Wil tells us they should be more respectful.
While that would be cordial…it is almost laughable. If you are at VC stage (no mature proven model more fitting for private equity…but strictly VC-concept) simply be grateful you have even been invited to the meeting at all in the first place.
Additionaly, there is a contradiction here. On one hand Wil asks for more courtesy from the VC on their expectation (selling the borrower)….but then he says that they shouldn’t let us down easily…instead just giving it to us straight with a clean cut ‘no’. Frankly, I think this author is asking for a lot, and may be the real lesson why his pitches didnt pan out, leaving him writing articles about what to do instead.
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Ray Bohac said:
As an entrepreneur that is raising capital, I agree that it is important to learn about the company your are pitching to and then set the expectations and pace accordingly. Tips like this help us learn more from the mistakes we might make and improve faster.
I’m a subscriber to Wil’s blog and I’ve used a lot of the information he has posted to as a way to try to look at my own company from an outside perspective. Keep it up!
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John Hunter said:
Raising Capital vs. borrowing money is a term that certainly makes one feel better about life. Ask anyone who has actually received money from a VC firm and has been under the microscope of how it is being spent and they will surely agree that it is in fact Borrowing Money….and at a very high interest level at that.
What the article suggests is that the VC should outline the expectations, stay in touch, take responsibility and finally be honest in their appraisal of the business plan. I agree with Ray that these are valuable tips…just question the realism of these expectations.
My point was simply that Wil is asking for a lot and that this is a tall order for an organization that doesnt have to. He who has the gold makes the rules. The onus is 100% on the one in need.
Don’t take my comments the wrong way. This is what blogs are for. I am also a huge Wil Shroter fan and have been for many years and he has helped me enormously with my business. (He literally guided me in retooling my business which eventually sold it in 2000)
That doesnt mean he is immune from some good old fashioned critique.My point is simply that the due dligience is on the borrower not the lender. These are all great points….but should have been directed toward the entrepreneurs or borrower, not the VC or lenders.
Asking for these things is not out of the question…..just somewhat unrealistic.
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Chris Skudder said:
Good article - interesting responses.
- As entrepreneurs: when we get the appointment with a VC, we can request a clear agenda, direction, and expectations. You might get it or you might not, but you don’t have to wait around to see if VC’s pick up on this. If nothing else, the VC’s response to your request will reveal a little about who you’re pitching to.
- In raising money, selling, and a couple other things — a FAST ‘NO’ is the only valuable alternative to a ‘yes’. Drive for one or the other; don’t invest too much time with anything short of one or the other.
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Nick Braun said:
I think there have been some great thoughts shared on this topic and I would like to add some of my own from an early-stage VC perspective. I agree with Wil 100%. Not setting clear expectations would be a waste of both the VC and the entrepreneur’s time. Before an entrepreneur pitches at one of our partners meetings we often coach them one-on-one to make sure they are clear about what to expect. This ensures that the entrepreneurs are well-prepared so when it comes time for a pitch we can make a sound decision based on the business as opposed to the presentation skills of the entrepreneur.
We have tried to design our entire investment process to be very ‘entrepreneur-friendly’ for the simple reason that all of our partners are ex-entrepreneurs who understand the difficulty and stresses of raising capital. Part of this process is making decisions as quickly as possible and giving reasons for saying no. In many cases we have said no and actually helped the entrepreneur find other sources of capital better suited for their needs. In cases where we say no because the company is in too early of a stage we will tell them what specific milestones they need to accomplish in order for us to consider investing (and yes, many of our portfolio investments were a no at some point because they were too early… for you skeptics).
Finally, I think Wil is touching on a shift that is occurring in private equity today that will change the traditional VC model. The steadily increasing amount of limited partner investment is compounding the amount and size of funds while the cost for most high-tech start-ups is beginning to decrease. This simple shift in supply and demand is putting more power in the hands strong businesses and seasoned entrepreneurs. Wil is absolutely right, if I were an entrepreneur with a strong business model I would ask the VC, “What value can you add to my business besides money?â€
The best VC firms don’t simply make capital investments; they also invest their time, experience, network and other resources in order to enhance the value of the businesses they invest in.
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Cameron Sutter said:
I agree with Wil. The VC isn’t just forking over cash. He’s investing it for a big return later. If he wants that big return, he’s gotta prepare the entrepreneurs.
