Insight from Anneza Pitsialis – Accelerator Programme Lead at Central Research Laboratory.
Venture Capitalists are your customers.
Steve Blank’s mantra “get out of the building” and Eric Reis’ Lean Startup are gospel for early stage startups seeking product market fit. It is widely accepted that understanding your customers is key to any startup success. However, it’s less common for startups to apply this same principle to getting their investment strategy right.
When seeking investment (i.e.selling equity) VCs and investors are a startups customer. Understanding their process and perspectives gives founders a better chance of success.
“If you are unable to understand the cause of a problem, it is impossible to solve it.”Naoto Kan
In July, we ran our second online programme “How to secure early equity investment” delivered in partnership with KPMG Emerging Giants and ERDF. 22 Founders and 10 investors came together to share insights and best practices on how to meet investors, build a relationship and get that deal. One insight was echoed across every session and by every expert – prepare, prepare, prepare!
We have summarised their top tips and practical advice to help founders navigate the investment journey.
1. Finding and connecting with investors.
This is not a numbers game.Sam Heilds, OpenOcean
- Do your research. Establish if and how your company is relevant to the fund. Check their fund size and strategy to make sure your company and financial ask is aligned.
- Get to know investors. Understand what piques the interest of individual analysts and investors. Read the teams’ bios, follow them on Twitter, LinkedIn, read their blogs, see what events they go to and which investments they have lead.
- Research their portfolio. Have they invested in similar companies, competitors?
Warm intros are much better, but not the only way.Reece Chowdhry, RLC ventures
- Search LinkedIn for connections in common and ask for introductions.
- Reach out to recent portfolio companies. It’s an opportunity to do your due diligence on the VC and to ask for that introduction.
- Attend events. VCs spend lots of money and time on events where their sole focus is deal flow. Take advantage by researching who’ll be there, join the matchmaking app, try to set up meetings in advance – tailor what you want to say to each investor so you don’t sound like you are spamming them like a robot – be personal, human but have your messaging clear and concise.
- Try to stand out. This could be as simple as approaching an investor via LinkedIn rather than email, where inbound traffic is less and your message will be noticed. Or by sending you deck/ pitch in a video format
2. Nailing your comms and getting investors interested.
Don’t be spammy!Sam Heilds, OpenOcean
- Write as you would talk. Be human. Be you.
- Don’t use bold, underlined capitals and highlights in your email or mail merged emails. VCs get so many emails they can immediately identify it’s not personalised and will delete it.
- Find a personal connection. Research the investor and try to relate to their interests, past investments and event they have spoken at or blog they’ve written
- Keep emails short and concise. In a couple of sentences you should demonstrate that you’ve done your research and have explained why your startup is relevant.
[The meeting/ The pitch]
Don’t tell people ‘it’s complicated’.Carlton, Aceleron
- Make sure you are aligned. Start the meeting by clarifying what you want to get out of it and recapping what you’ve understood their aims are. Close by recapping the next steps to manage expectations on both sides.
- Work on your narrative and getting key messages across.
- Explain what you do simply and concisely. Practice this before you get in-front of investors – especially if your product is super technical.
- Using language techniques like ‘FOAM’ (Facts, Opinions, Anecdotes, Metaphors). These will help you tell a captivating story about what you do and why it matters.
- Don’t BS. Always tell the truth. Lying or keeping important information from the investor will damage the relationship and your chances of investment.
Present [information] for the perspective of an investor.Susannah McClintock, Sustainable Ventures
- Know how much investment you want and what it will be for.
- VCs will want to understand your ‘Development Pathway’. You should identify milestones that have/will create commercial value for the business.
- There is always competition. Don’t avoid talking about the competitors or say that there are none. Highlight what they have done well and how you position your business against it.
- Traction and team are a big deal. The fact that your previous startup had a unicorn exit or you’ve a paid pilot with Amazon should not be a casual comment or an afterthought.
Start with the story you want to tell… not the slides.Richard Potter, KPMG
Tailor your deck for the right situation, to compliment your narrative.
- Business Plan (appx >50pp): Fully detailed plan of your business. It is meant to be read and understood on its own and demonstrates diligence.
- Investor Deck ( appx >20pp): This should stand on its own and can be understood without a voice over. It provides a potential investor with further information that demonstrates the vision, credibility and opportunity of the business. It is salesy and should be a deductive approach (claim something and justify it) rather than inductive (putting hypothesis and analysis first).
- Leave-Behind (<10pp): Send to a VC after your initial meeting or in preparation for the initial meeting that enables them to remember your pitch. Shorter than the Investor Deck. Includes an executive summary. High level information that captures the key messages and can be understood on it’s own.
- Pitch Deck: This can be any number. The slides should support your narrative and not distract from what you are saying. Each slide should summarise one point you are making. Use imagery to provoke emotion and support your story.
- Limit the number of key points you are making per slide so you don’t overload your audience or lose the impact of your messages.
- Consistency is key. Using the same fonts and sizes throughout.
- The Golden Ratio. (Width of blocks = 1:1.618) Grid lines will help you align positioning and composition of your slides making them easier to depict. .
- Hierarchy of Emphasis. Sizing your text so people know what is important to read first, next, and next. Blank spaces are good and also help to draw focus to important text.
- F Logic. Compose your slides so the content flows from top left to bottom right.
3. Managing the process and being prepared
Approach it as a sales process.Susannah McClintock, Sustainable Ventures
- Don’t bypass the Analyst/ Associate. VC’s will have an internal process for scouting startups and that often begins with an Analyst or Associate and develops towards a Partner meeting as the prospect of investment grows. Respect the process, target the right people and build positive relationships throughout.
- Be organised. Have your admin in order so you are ready to follow-up with relevant information when needed. Make sure you stick to timelines, respond quickly and complete tasks when you say you will.
- Think from a VCs perspective. You want it to be simple and stress free for them to access and review your information so having a thought out, well structured Data Room with consistent naming conventions, folders, etc is important.
Find other VCs to test and practice your proposal.Andrei, BotsAndUs
- Identify your top 5 VC’s but set up meetings with other investors first. Each time you deliver your investor pitch you’ll gather vital feedback from investors and build your confidence before you get in front of those top VCs!
Choose your investor wisely – it will be a long lasting relationship.Reece Chowdhry, RLC Ventures
- Founders should do their due diligence too. Reach out to the previous startup(s) the fund has invested in to find out their experience of working with the VC.
- Maintain relationships. If an investor shows interest in your business but says the timing isn’t right keep them updated as you progress. Setting up an investor email group is an easy way to manage comms.
- The VC network in the UK and Europe is fairly close-knit. Any reply, conversation, meeting should be seen as a win as it gets you into the network and on the investor CRM!
- And finally, remember to be yourself and natural in the way you communicate. People buy people not ideas.
“It’s great when the personalities of the founders come through.Sam Fennell, AngelCoFund
To hear about our future programmes email: firstname.lastname@example.org