A series of articles about getting through the VC process from a serial entrepreneur who now sitting on the other side of the table.
This is part of a series on what it takes to get your company funded. In this chain of posts, I want to take a slightly different perspective from the usual “we want to see this” articles peppering the web. I want to present two sides. First, what is expected of you and second, what is expected from the VC as well. Too often VCs focus on their expectations of what companies need to present and prepare because we are in the business of looking at dozens of potential investments every month and want to get through them quickly.
Unfortunately, I will start with a post about the work you have to do: getting the materials together. Not much work for the VC on this one, but you need to have these things ready to go. It will make the rest of the process smoother and give the investor no excuse for dragging his feet asking for “additional information.” If your presentation package is complete, the funding process can follow a familiar and acceptable pattern: some quick and understandable ”no’s” and, hopefully, a sequential series of “yes’s” leading you to your final goal.
…have a few things ready before you start seeking funding. Elevator pitch and executive summary are the minimum. The others are nice to have and will be required soon if the first two are good, so you might as well get them ready. Do not write a business plan unless you are doing it as a tuning exercise for your own thinking or a business school class assignment. I have never written one. I will never read one. Here’s what you need:
- Elevator Pitch: one paragraph (150 words or so) explaining the market you are targeting, the product you are building and how it aims to address that market, a word or two about the team, and the deal you expect to get (capital required — skip the valuation, these things are usually implied by the amount). I know it is hard to put your life’s passion into a paragraph. But, this is what gets read first and, often, the whole idea gets rejected if this paragraph sucks. As I was taught in my journalism classes — the editor can cut your story at any point, so make sure to say everything in the lead paragraph, before the cut. This is your story’s lead: Why now? Why this? Why us? How much?
- Executive Summary: one page summary that elaborates on the elevator pitch. You can make this page dense, but still keep it to one page and keep it in a universal format like PDF (I, for one, do not like to mail around Word documents or PPTs). This page should support all points of the elevator pitch and set yourself up for getting enough interest to get a solicitation to see the pitch deck. In the summary, you need to have more details about the market (skip the TAM and SAM figures — good VCs should know those), but rather focus on the traction the market is getting, how fast it’s growing, where the users are. Talk about your success in that market, mention big customers, focus on growth. Product — don’t just describe your technology as “unique,” “innovative,” or (God forbid) “patented” — explain what you do and how. Yes, that’s hard on a single page, but you have to do it. Talk about the team in terms that apply specifically to the market (business side of the team) and product (technical side of the team). Attach links to your LinkedIn profile (not your academic papers). If you have a link to a video of you doing a presentation, even if it is on a different topic, and you sound good, attach that as well.
- The deck: A short 10-20 slide (NO MORE!) deck (PPT, Keynote, or PDF) that can be presented in about 30-40 minutes. You will have one hour to meet with an investor and you want to leave plenty of time for questions. The deck should elaborate on the points brought up in the executive summary, still be short, and not have any animations, sound effects or videos. There is a classic: 10/20/30 rule but, I think the 30-point font can be relaxed — not everyone is Steve Jobs (or Guy Kawasaki). Just make sure it is concise and to the point, has some graphics to break up the monotony, and flows naturally. I want to hear your voice as I flip through the deck and follow a single, coherent train of thought. Again… the problem, the solution, why us, what will it take, and where will the company be when the money it is raising runs out.
- A competent technologist: I will want to check out the technology behind the product. Make sure there is someone on your team who can talk about the product with a competent technical VC or their representative, preferably using a whiteboard rather than slides. ”Our product is developed in Romania and we have no idea how it works” is a show stopper. Architecture diagrams, sample code, API references, RDoc/Javadoc, etc.
- Website: In this day and age, there is no excuse for a company, even at the earliest stage, for not having some sort of a web site. There are excellent services out there like unbounce.com that let you create a landing page for your company or your domain (if you secured one). A “real web site” would be better, of course.
- Demo: If your product is a web-based consumer-facing service, you should have invites ready for your “beta” program and your VC should ask for one. It doesn’t need to be perfect and complete, but there should be something. There is no better way of conveying the experience a customer would bet.
- Financial Projections: A spreadsheet (Google or Excel) that shows the modeling you did for future customer growth, revenues, and expenses. Five years is common, three years is often OK. Interested in two sides of the model: revenue projections and assumptions about them as well as cash burn.
- References: You will, inevitably get asked for these if things go well. Might as well think about what the list would look like. Personal references are OK, professional references are WAY better. If the VC knows you personally, you can skip some of these things.
- LinkedIn account: This is the way I connect to people and check them out. Besides the work experience summaries, I will look at education, publications (if any), and who else is in your network. Get this set up an looking good (and recommend that your co-founders do so too). I will have another post on how to best do LinkedIn introductions to investors in a few days.
- Email address: Gmail is fine, if you can register the domain — that’s better. No @aol please — it’s 2011.
- Blog, social presence (nice to have): If you blog, and your blog is related to the market or product you are building, realize that interested investors (or at least this one) will read it. I will also look at your Quora answers, your Klout score, your Twitter stream. I will not look at your Facebook page. I will want to know how you think and how smart you are. I only invest in smart people. How well you express your ideas in writing is one indicator of that.
I know this seems like a lot of work, but, you want to have all the tools you will need at the ready before you get started. Some of the materials may be created during the funding process, but you should be prepared to have all of the above scrutinized.
…always be willing to listen but set the expectations of what will be required to actually get the funding done. If we’re into the idea, we can even help with putting together the materials. In order for us to be “into the idea,” however, you have to get VCs to notice you. So, stay tuned:
CONTINUED: Step 1 – Getting VCs to notice
- Elevator pitches and the point of your marketing [René Power] (ecademy.com)
- Why You Need A Powerful Elevator Pitch (blogs.sitepoint.com)
- Market, Product, Team (thansys.com)
- Getting Funded: Step 1 – Getting VCs to notice (thansys.com)