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Category: Pitch, Startup

What Startups Should Say During A VC Pitch

In this collection we dive in what your pitch should contain, and what a VC wants to learn and hear about your startup.

Read also the collection of items that you should NOT say at a VC pitch: What Startups Should Never Say During A VC Pitch.

1. Company Overview

The VC wants to know who you are.

# What VCs want to know
1.1 What do you do?
1.2 How old is the firm and what key milestones have you already met?
1.3 Who are your customers and partners?
1.4 Who are your existing investors and what is your financing history? (Dollars in, valuation, date)
1.5 Tell VC about this round
1.6  What is the investment opportunity for me?
Common mistakes
  • Lack of clarity of what you do.
  • Put the “WOW” up front.
Smart Strategy
  • Emphasize relevant experience.
  • Borrow credibility from customers and partners.
  • Bootstrap the startup to the first milestones.

2. Investment Opportunity

The VCs should understand here why they should be excited. This section is about the part where the elevator pitch comes in.

# What VCs want to see
2.1 Is there a large market opportunity?
2.2 Is this a unique, compelling solution that is validated by early customers?
2.3 Do you have an unfair market advantage?
2.4 Is this the right team for this opportunity?
2.5 Are the returns going to be venture-scale?
Which means, can the VC expect to make 5x-10x within 5 years of investing in the startup.
Common mistakes
  • Not clear what this is all about.
  • Poor pacing.
  • Lack of impact.
  • Startups makes claims that cannot be substantiated
Smart Strategy
  • Get the VC excited no.
  • Borrow credibility from customers and partners.
  • Be confident, crisp, credible, and compelling.

3. Business Problem

The VC wants to know if this is a compelling problem.

# What VCs want to know
3.1 What market are you addressing?
3.2 Who is your customer?
3.3 Where and how serious is the pain in the market?
3.4 What are the market factors forcing the change?
3.5 What’s wrong with the existing solutions?
3.6 Is the pain really serious enough for customers to work with a startup?
Common mistakes
  • A nice-to-have but not a must-have.
  • Belief that the technology is compelling by itself.
Smart Strategy
  • Startups works with customers as design partners.
  • Startup has a customer advisory board.

4. Unique Solution

The VC wants to know if the startup has a compelling solution.

# What VCs want to know
4.1 What exactly is the product or service that customers buy?
5.2 What is your value proposition, economically, and other benefits?
4.3 Did customers help define the product? Is this solution broadly applicable or a one-off?
4.4 How much does it cost?
4.5 Do you have a whole product solution?
4.6 Do you have reference account proof points, ROI and other metrics that you can talk about?
Common mistakes
  • No clear business benefit or ROI.
  • Faith-based design.
  • Sounds like a consulting business.
Smart Strategy
  • Startups works with customers as design partners.
  • Startup has a customer advisory board.
  • There is an external market validation/research.

5. Underlying Technology

The VC wants to know if this is hard to do and thus hard to be duplicated by a competitor.

# What VCs want to know
5.1 How does it work?
5.2 What is the secret sauce?
5.3 How hard will it be to productize the technology?
5.4 Is the product finished? Is this the release we are betting on?
5.5 Are the most important elements patent-protected? Are provisional patents filed? Is there a world-wide patent filed?
Common mistakes
  • Too much detail for non-specialist VCs.
  • Too much customization needed to have scalable sales and support.
Smart Strategy
  • Simple diagram showing how this fits into customer’s environments.

6. Target Market

The VC wants to know if this is a venture-scale market, that gives the return that a VC expects, which is typically 5x-10x the invested amount within 5 years. This varies by industry.

# What VCs want to know
6.1 What is your primary market?
6.2 How big is the market today and tomorrow?
6.3 What’s the Compound Annual Growth Rate (CAGR)?
6.4 Are underlying market forces driving this growth rate?
6.5 What is the key market bet we are making?
6.6 What is your market share at break even?
Common mistakes
  • Market is too small.
  • Growth is anemic.
  • There is a lack of focus. Startup is pursuing too many markets or niches.
Smart Strategy
  • 3rd party analyst data backs the claims and concurs with your own pipeline.

7. Go-to-Market Strategy

The VC wants to know if the startup can build the business.

# What VCs want to know
7.1 What;s your unfair business advantage?
7.2 What’s the sales model?

  • Channels and partners
  • Pricing
  • Sales cycle
7.3 Can the startup sell efficiently?
7.4 What is the world domination strategy?
7.5 How much sales visibility does the startup have for this and next year?
7.6
Common mistakes
  • Stating that “our technology is so much better than the competition.”
  • Stating that “if we build it, they will come.”
  • It’s a science project, not a business.
Smart Strategy
  • Have a go-to-market partner, but don’t bet the farm on him.
  • Show a credible sales pipeline.

Enterprise Go-to-Market

The startups should think beyond direct sales. Consider also:

  • OEMs
  • Strategic investors
  • Telesales
  • Sales 2.0 tactics
    • heavy use of web
    • viral marketing
    • low touch techniques
    • low cost of customer acquisition
    • SMB markets

8. Competitive Landscape

The VC wants to know if the startup is meaningfully ahead.

# What VCs want to know
8.1 Who are your primary competitors?
8.2 What do you do better than anyone else?
8.3 Are the key advantages which the startup highlights really important to customers?
8.4 Is the differentiation sustainable?
8.5 Where is the startup vulnerable?
8.6 What is your Gorilla strategy?
Common mistakes
  • Startup claims “we have no competition.”
  • Startups doesn’t know existing competitors.
  • Startup is narcissistic about small differences.
  • Startup focuses on features more than benefits to the users.
Smart Strategy
  • 3rd party reviews and customer references.
  • Startups differentiates on business attributes, and not just technology.

9. Financials

The VC wants to know how capital efficient the startup is.

# What VCs want to know
9.1 What is the survival strategy?
9.2 What do the 2-3 years profits & losses look like?
9.3 What’s the burn rate (monthly cash use)?
9.4 What’s the break even look like?

  • number of customers
  • revenue
  • market share
  • employees
  • cash used, cash in bank
9.5 Can the startup get to break even with the current strategy, product, and market focus?
Common mistakes
  • Startup doesn’t understand what VCs want to see.
  • Claiming a hockey-stick growth.
  • Only showing or predicting anemic growth.
  • Unrealistically low capital needs.
Smart Strategy
  • The Pitch deck should have backup slides with more detailed financial information.
  • Have a spreadsheet model ready to share.
  • Use peer comparison.

10. Milestones / Use of Capital

The VC wants to know what has to happen for a successful next round?

# What VCs want to know
10.1 What are the milestones and metrics?

  • product milestones
  • team building milestones
  • sales and logos
  • partnership milestones
  • financial milestones (get to break even)
  • operational metrics
10.2 What’s the risk of running out of cash before milestones achieved?
10.3 How will the capital be used?
Common mistakes
  • No real business plan (“If you don’t have a business plan, you don’t have a business.“)
  • Vague metrics.
  • You predict, but don’t show hockey-stick growth.
  • You have high risk milestones.
Smart Strategy
  • Identify peer companies to explain and benchmark your business.

 11. Team

The team is the biggest bet a VC makes.

# What VCs want to know
11.1 Person, title, experience.
11.2 What have they done that is relevant?
11.3 Have you worked together as a team before?
11.4 Have you made investor dollars in the past?
11.5 Does anyone know this business in their bones?
11.6 Who are you missing? What are the hiring plans to fill the position?
11.7 Can we help build out the team?
Common mistakes
  • A jailhouse, time-served resume.
  • Lack of experience relevant to this business.
Smart Strategy
  • Have an anchor team member.

The Dream Team

  • Made money for investors in the past.
  • Built marquee companies.
  • Has startup experience.
  • Worked together before.
  • Developed class-leading products.
  • Dealt well with adversity; turned around company from under-performer to high-impact winner.
  • Managed positive M&A or IPO exits.
  • Has an excellent contact network in the market.
  • Hires well.

12. Reasons to Invest

The VCs want to know why they should be excited.

# What VCs want to see
12.1 Large market opportunity.
12.2 Unique, compelling solution validated by early customers.
12.3 Unfair market advantage
12.4 Right team for this opportunity.
12.5 Venture-scale returns.

More

Read also the collection of items that you should NOT say at a VC pitch: What Startups Should Never Say During A VC Pitch.