10 Soft-Skills Tips To Pitch Business Angels and Venture Capitalists
Entrepreneurs are often told what they should pitch to financial investors (business angels and venture capitalists, mostly), but more rarely how to do it. Soft skills matter, too.
Last summer, we coached about 30 startup founders who took part in the future “French Shark Tank” TV program. These entrepreneurs pitched five business angels (some of whom are well-known tech entrepreneurs) to raise a seed or series A round.
Here are the top 10 tips we gave them to pitch financial investors.
1. Make Short Answers
Most entrepreneurs want to convince us of something: buy their product, invest in their startup, or make an introduction to somebody else. Otherwise, they would not be entrepreneurs.
Most investors, on the other hand, are busy people who are trying to best allocate their scarcest resource: time.
Making short answers will help you not only cover more material (see point 5. below), but also avoid unnecessary questions springing from a long reply.
2. Be Inductive, Not Deductive
While we do recognize there is power in telling a story, be sure you understand how much time you have with the financial investor.
Being inductive means that you give the short answer first, then explain the rationale.
As we often tell startup founders, don’t act as if you were in a detective novel: don’t waste precious time getting to who’s the killer. Answer first, then offer more details and explanations.
When a VC asks you what your market size is, for example, start by giving a number, then offer more details and explanations.
Don’t start with excruciating details about how your market is not mature yet or which assumptions you used to size it.
Always give a short answer first.
3. Be Data-Driven
Data is taking pre-eminence in today’s digital world powered by artificial intelligence.
Investors expect data on how your product is being adopted by customers. As the adage goes: “How do you choose between two good ideas? You pick the one that sells.”
Besides, investors – especially professional VCs – are generally highly analytical individuals. They need to crunch data to make informed investment decisions.
The best entrepreneurs are known to be obsessive about how their product is used, not used, or what customers are expecting of it.
Providing both demographics and usage-driven data not only shows your focus is right, but it’s also a clear sign that you are in a position to grow your business long-term.
4. Be Honest
The attitude stemming from cliché mottos such as “Fake it till you make it” has come under scrutiny, in part thanks to the Theranos story.
However, what most entrepreneurs seem to ignore is that “fake it till you make it” is just a mindset.
It doesn’t mean you should lie.
You should never lie, and even less in an environment where most people know each other, and reputations are made and unmade very fast.
That’s not true. ‘Fake it till you make it’ means taking orders by email when you don’t have enough volume to built an ordering system. It doesn’t mean lying. Ever.— Benedict Evans (@benedictevans) May 21, 2018
If you don’t know the answer to a particular question, say so.
Also, make sure you get back to the investor the next day with an answer.
5. Make A List Of Three Points You Want The Investor To Remember
Meetings with financial investors are generally short.
The prevailing duration these days is 30 minutes.
Make a mental list before the meeting of three points you have to make before the end.
Make sure you address them, while still answering questions the VC may ask. However, know that VCs are curious by nature and may inadvertently drill on a point that is not critical to your success.
Learn how to politely but firmly prod the discussion your way.
Use sentences such as: “Going for market segment [Z] is part of our plan, but not before we get traction with Verticals X and Y. Let me tell you what our thinking is on this crucial matter.”
6. Don’t Burn Bridges
Investor meetings are often highly emotional because entrepreneurs spend much time on the road and often need the money urgently to keep growing their startup.
Founders raising seed rounds meet with 60 to 80 investors on average. Not all of these meetings are fruitful.
Life is long, and who knows, you may cross the investor’s path in the future. Make sure you treat all potential business partners with professionalism. It will help you down the road.
7. Acknowledge That Investors Want To “Exist”
Just like you, or even more so, investors want to show they know. Or at least, that they understand what you are talking about.
Others need to rephrase what you are saying to understand it fully.
Others still need to interact to stay alert.
Whatever the case may be, let them have their moment.
8. Don’t Pay Attention To The Noise
Founders who are rejected by investors often come out of meetings thinking that the VC “didn’t get it” or that they don’t know enough to make an opinion.
After all, you’ve spent the best of a couple of years trying to develop an idea, how can they know better than you do?
The reverse is also damaging: taking every investor’s remark at face value.
There are, in our experiences, two principles in your interactions with VCs and business angels:
- You should not listen to every piece of advice given by people who ultimately don’t invest in your startup; and
- Experienced investors have seen more than you have and generally share tips, or at least give you an indication of what is missing in your project to get funded
Amid the four or five reasons an investor will provide to decline your investment opportunity, only one or two may be valuable.
So don’t focus on the noise, try to locate the gems.
9. Don’t interrupt investors
On top of being very annoying – and, in some cultures, bad business etiquette –, interrupting investors often leads to misunderstandings: you will believe you understood the point, but most probably haven’t, and will answer wrongly.
Don’t forget that investors are looking for partners in startup founders. They want to make sure you can listen.
Conversely, if an investor keeps talking during the meeting and doesn’t let you explain what you do, he or she probably isn’t the right partner for you.
👉 See point 6.
10. Listen first, talk second
It is a different point than the preceding one.
VCs have a point in mind 90% of the time they ask a question.
For example, they will ask: “How much were your revenues last year?” but are expecting you to answer on your recent traction.
After you answer, they will drill you with sales-related metrics, such as average basket, repeat buys, MRR, monthly growth, funnel transformation, pipeline probability, commercial cycle, and the like (depending on your business model).
Jason Lemkin: The Right Sales Metrics for Your SaaS Startup // http://t.co/9JVBmjFjfQ— Jason ✨InItTogether✨ Lemkin (@jasonlk) August 28, 2015
When you keep interrupting them or make long answers (see point 1. above), VCs don’t have time to get to the core of what they want to know.
Consequently, you walk out of the door without having given enough information for the investor to decide whether or not to pursue analyzing your investment opportunity.
The way you interact with investors during a first meeting is a big tell of how the relationship will look like should they invest in your startup.
While there is much money around, there also is a glut of entrepreneurs with big dreams.
Investors spend more efforts trying to understand where to allocate their resources (capital, but also time) than any other task they perform. In VC jargon, it’s called “managing the deal flow.”
Soft skills listed here will help you stand out, and hopefully get closer to your fundraising objective.
Interesting post about how to handle answers and reactions while pitching. Definitely when answering VC questions ‘less is more’. It’s also very interesting how poweful could be the ‘I don’t know’ card, since it will avoid uninspired answers and stress situations.
Very true Gabriel. The key is to follow up with the answer to the questions asked promptly. It will build your credibility with potential investors.