Invention Investors: How to Pitch to Venture Capital Firms (Guide)

November 18, 2021

It is paramount for every company in the process of establishment to pursue sources of funding for their invention. Venture Capital firms commonly referred to as VCs, come to the rescue. They provide private equity to startup companies that have potential long-term growth. Venture Capitalists target those startup businesses that can quickly grow with a capital boost, primarily based on technology, high market potential, and a substantial return on investment.

However, a startup company does not just invest, an exhaustive background check of the company is conducted. The establishing company must therefore identify and come up with an excellent structure to attract possible investors. When looking for investors, there are factors that a company ought to consider. These factors include: location, partners, sector preference, stage preference, portfolio, asset, and fit. Many possible VCs exist today, suitable for upcoming companies since they have a wide range of selections.

In making the selection: –

  • Come up with a list of top known and possible investors, e.g., Venture Deal.
  • Consider the geographical location, market region, and phase of development of the VC.
  • Consider the going concern of the VC. The use of the internet website, daily reading of business-related articles, listening & watching the news can help keep one up to date.

Once you select the best VC out of your list and thorough scrutiny of your research, the next step is to identify the contact person of that particular VC firm. The right partner or contact person of the firm is bound to give reliable information concerning the firm. This is because partners in most VCs have a say in meetings held in the firm’s decision-making body. For instance, the board of directors of a firm.

In this time and age use of social media and advanced technology is on the rise. Many venture capitalists participate in online social networks through which you can get introductions to them.

Where possible, one can pull multiple introductions or create social network relationships through platforms such as blogs and Twitter. One may also attend as many trade conferences and events as possible, including Venture Capitalist Firms and other key investors. You may also choose to send a teaser email, which is most preferred than self-introduction and website post email.

The teaser email should be short and precise. Its aim is in pursuit of a one on meeting with the VC. It teases the VC to learn more about your company, create intrigue, anticipation, and a sense of urgency. The teaser Email should also lay down in point form your company’s goals, for instance, show that the market size is big enough and proof of a capable management team. Some Venture Capitalist Firms may request more information, and you may opt to send the executive summary of your company.

How to Pitch to VCs to Create Trust & Interest

Step #1: Basic rules on presentation dictate one to

  • Know your audience
  • The needs and goals of your audience
  • The class of your audience
  • What does your audience think of you?

Once you’ve understood your audience, let it stick with you throughout your presentation. First, grab their attention by a smooth flow of your introduction; you could crack a mature joke or two. Then, let your audience be eager to listen to what you are offering by briefly touching on your presentation. Your presentation shouldn’t be too shallow or lengthy. Instead, emphasize key points that you wish your audience to remember and pay attention to.

The use of slides creates a visual aid for your audience. It is best preferred because the information is presented in point form and easy to remember. Incorporate the use of stories related to your presentation with a bit of humor. This makes your presentation memorable as compared to a fact-based presentation. Remember to pause throughout your presentation to allow the audience to sink in your points. It is usually said that last words linger and are never forgotten. End your presentation in style by using well-rehearsed, unique, and notable remarks. Re-run your key points and briefly mention them. Once you are done, ask for the next step. Questions may be asked hence you ought to be well prepared.

Step #2: Power of your ‘T’ (Trust) factor

It refers to your relation, interaction, and one on one meeting with the investor. Investors and lenders are said to be attracted to the idea of a business and not the entrepreneur. Factors to reflect on: Appearance, Common agendas, Drive, Referrals, Evidence, Rapport, Skill Authority.

Step #3 – Slides

A well-planned and proper presentation consistently earns one a possible investor or two. It is essential, therefore to keenly plan your presentation for a better flow. Good attracts good.

  • The first slide should have your company’s contact details; location, Email address, phone numbers, and physical address.
  • Vision – have an eye-catching slogan. One that’s unique, short but illustrates your vision. You may choose to use a short illustration of the problem your business or company wishes to solve and the solution you offer.
  • Business Logo – display your company logo to show originality and uniqueness.
  • Summary – status of the company, mission, services offered, solutions you offer, and critical success factors.
  • Market problems – what is the current market problem? What solution do you bring? How different will your company solve it? 
  • Competition – is there a solution to the current market problem? Are customers satisfied with the solutions available? Why should you be considered for providing better solutions?
  • Market & Sales –strategies on acquiring and maintaining your customers, selling and distributing your products/services, or both. 
  • Teamwork Innovative – who are your working mates? What have they accomplished? How qualified are they?
  • Financial Needs – how much do you need to accomplish your set goals? How urgently do you need it? Have a graph or a pie chart illustration of your financial projections
  • Conclusion – End your presentation by recapping your vision, business idea, and a brief of your presentation.

step #4: After meeting with Investors

After meeting with the investors (possible investors), recap on it and make corrections where necessary, email a copy of the corrected presentation. This contributes to your PowerPoint presentation as you can recall the investors’ mood and their reactions. One is also able to rehearse for the slides presentation since you can use a mock audience.

Though familiar and known to you, the audience helps lessen the tension, improve your presentation tips, and ask questions likely to be asked at the formal presentation. Usually, this pre-preparation builds confidence in you and sets a platform for improvement. During the presentation, use custom animation as they allow you to make one point at a time as you maintain eye contact with the audience and be flexible. At the end of your presentation, have backup slides for questions that may pop up. It is always advised to do a follow-up after the presentation to know the way forward.

Answering VCs Questions and Closing the Deal

Lenders and or investors are bound to ask questions since they want to see how well you manage your finances. They are eager to see their investment multiply and grow. As this is the case, you ought to be careful when answering some of their questions. Questions to do with finances are tricky, and care needs to be taken when answering them. Don’t acclaim yourself or the company. Focus on the agendas at hand and stick to what the investors are interested in. Remember to connect the set goals and objectives of your company when answering these questions. It helps you give well-founded answers. For instance, the market will determine your valuation, which is the best answer since markets and demand for products vary with time. When finances are given to you, how well will you manage them? If a lesser amount is offered, how accurately will you account for it? These are some of the critical elements investors look at hence, one ought to be well prepared.

Closing the Deal

A term sheet comes into play when deals to do with businesses are mentioned. A term sheet outlines concrete terms with the conditions of a possible business agreement. Usually, a term sheet is not binding, and the lending party prepares it. In this case, you enter into a financial agreement with a Venture Capitalist Firm, lender, or investor. The agreement describes the amount of capital to be raised, offers given by the lender, etc.

To close a better deal, create a competitive market since many VCs may be interested in financing your company. With a competitive market plan, you can negotiate better terms in the term sheet. Specific terms such as a lock-up period clause may be incorporated in the agreement. They restrict you from getting into other agreements with other VCs hence, you can review other agreements from different investors before executing. Your goal is to collect as many term sheets as possible, which allows you to spot and negotiate top assessments and a better marketplace for your investment.

Due diligence or prior thorough research is essential. When conducting one, enquire from as many Venture Capitalist Firms as possible on the term sheet agreement. Learn more about the terms of the agreement, firm management, legal status, and strong background before executing. Learn more about the investment and what you are getting into. Usually, Venture Capitalist Firms do not sign Non-Disclosure Agreements. Therefore, you have to come up with a plan on how to protect your business ideas. For example, you may opt to focus on the benefits of getting into an agreement with your company’s firm, market and state a brief status of your intellectual property.

High Concept and Elevator Pitch

An elevator pitch displays your company’s vision. It is one of the features used by investors to rate your company’s idea. It shows what your company does or wishes to achieve. As the name suggests, it elevates/ uplifts your ideas. On the other hand, a concept pitch is a short line of words to sell your ideas based on a popular, successful thing/ business that everyone else knows. It is more of a tool that places the target group in a more curious position. They wish to know more of your concept based on the little you’ve shared. Therefore, a high concept pitch is most preferred because it is an upgrade of the elevator pitch. Usually, it is in the form of better yet short and powerful words on understanding what your company is all about.

Apart from the pitch deck slides, investors are nowadays asking for a business plan. So, to be on the safer side, it’s best to prepare one in advance so you can share it after the initial meeting.

The Business Plan

A basic Business Plan should at least have-

  • A title page – Name of the Company, contact details, physical and postal address. The name “Business Plan” should also appear.
  • An executive summary – the essence of your business entirely. What does your business or company do or specialize in?
  • Table of Contents – Though ignored, it is equally essential because it serves as a reference point for the investors. It is what investors use to trace a specific topic or subtopic from your plan quickly.
  • A description of the business – A presentation of your business idea is displayed here. Give details about your business, services, or products you offer and what makes them unique. Moreover, tell the investors why you chose that product or service, how you plan on offering or selling it, and how different it is from what’s already in the market.
  • Goals, objectives, and strategy – What do you wish to achieve? What aim or target does your business have? On stating this, remember to highlight the methods or strategies you’ll use to achieve the set goals.
  • Brief Background – Usually, this is optional. It includes a brief background of other businesses you have operated, why you chose the current venture, and why you picked the team behind your business. You may also opt to highlight any other relevant information as an overview briefly.
  • A description of your product/service – This is your business’s sole determiner and factor, without which the business plan makes no sense. Highlight in detail key features of your service or product. Tell us how different it is from what’s in the current market. Give a clear description of its uniqueness, value, and quality.
  • A Market Description – Describe plans you have for your market. How will you improve your market? What resources do you need to grow it, and how will you utilize those resources? Do you expect your market to change in the future? What effect will the change have on it?
  • Competition – Give a list of your significant competitors and identify their strengths and weaknesses. Since competition exists, it’ll give the target reader a hint on the difficulties your business might face.
  • A strategy on marketing and selling under this section illustrates how you will attract customers or clients to buy your products or services, respectively. Highlight the various modes you’ll use in selling your products or services. Have an action plan on how you expect to get customers to buy your product or service.
  • Manufacturing and Quality Control – Briefly state and give an assurance of how reliable your services are or how of good quality are your products
  • The Organization and management – This is the brain behind the success and a fruitful future for your company or business. How is your Organization? How ready or set is it to see your business grow? Is your management skilled enough for the tasks ahead? Briefly mention this, and you may opt to use their names, primarily if they are widely known.
  • The Board of Directors – List the people you have or expect to have on your board of directors. Be sure to include successful personnel, professionals, and people of good reputations—also, state whether the directors have contributed any form of finance to your company.
  • Financial plan and projections – this section is crucial in every business or company, whether it’s an ongoing business or a startup. It shows an estimation of where your business is headed. It is essential to include the ups and downs because marketing varies, and sales may go up or down. Therefore, be realistic in your projections, and the investors will understand your thinking because you are employing real business situations.
  • Stock and investment ownership – who are your shareholders, and what contribution have they made to your company? This is important to the investors because they’ll know who owns what in the company they are investing in.
  • Risks and Expectations – This is more of a backup plan or suggestion you could employ to reduce risk if your assumptions about your business don’t come into fulfillment.