Sunday, October 08, 2006

How to Pitch to VCs

How to Pitch to VCs

Here are five things you need to keep in mind before you pitch your business plan to a VC. Pick your VC carefully: Not all VCs are equal. There are specialised funds by industry and deal size (very early, early stage, etc). A good thing to do is to draw up a universe of VCs and then research their investment portfolios and general partners (the VC fund managers), and see if you can get a reference from one of their investee companies or associates.

Focus on the business plan: Your business idea is what the VC is interested in. Anticipate the VC's concerns and address them in your presentation. Make sure you have all the relevant numbers (addressable market size, expected rate of growth, likely margins). Show conviction in your business idea; if you aren't fully sold on it, there's no chance the VC will buy it.

Keep it simple: The surest way of cheesing a VC off is to make your presentation too long and too complicated. A 10-page, crisp and to-the-point presentation is better than a 50-page one. Highlight the most important parts of your presentation (uniqueness of the idea, quick scale-up potential, ready and growing market), and encourage them to ask questions. Where possible, show samples of work already done.

Put together a team: Here's a secret: VCs don't really bet on ideas, but teams. If you have a great team in place that has the domain knowledge, industry experience and the advantage of having worked together earlier, VCs will most likely fund you. In fact, some VCs will even suggest a better venture idea if yours doesn't seem to fly. The logic: A good team reduces the risks that a start-up usually faces. And good teams are the hardest to find.

Try again: Yahoo turned down an offer to buy Google in its infancy. Yahoo may be kicking itself now, but the point: That's how hard it is to get people to put money behind untested and untried ideas. It's likely that your idea will be rejected by quite a few VCs before it finally finds an investor. Don't be disheartened; learn from the rejections and make a better pitch the next time.

Vijay M. Veerachandran

"I am a dreamer. I believe nothing is impossible. If we can picture in mind,
We should be able to accomplish it                 Vijay M. Veerachandran