November 2, 2017 | 5-minute read (882 words)
You’ve set your empire and are ready to build it, one milestone at a time. For many of you that means pitching venture capitalists. New York’s venture community is wonderful, and also no-nonsense. With the exception of a few specialized investors (Gaingels is an active investment group backing LGBTQ founders, NYU Innovation Venture Fund invests in founders with ties to NYU, etc.), a lot of active early stage venture capital funds invest in a broad spectrum of companies.
In this article, we have gathered some nuggets of wisdom on how to pitch New York VCs. Specifically, we are including one piece of advice from each investor. This advice can include anything from investor materials, to pitch meetings, to an overall approach entrepreneurs should take when pitching their decks. Every investor has their own investment thesis, but provided a company pitching is within their investment interests, what do they need to do to make it rather than break it?
First things first: investor materials
The standard package of materials to be shared with prospective investors includes 3 items: a pitch deck, an executive summary, and last, but definitely not least, an elevator pitch – a brief introductory paragraph describing your company.
An elevator pitch should be crisp and succinct, short and sweet. Think about the “What, So what, Now what” format, and a maximum of 3 to 5 sentences.
As for executive summary, the best advice that we’ve heard came from Aaron Dubin of Innovative Endeavors. Aaron’s ideal executive summary includes “Team, Traction, Technology” – in that order. Team is often the most important criterion for early stage companies’ funding success. Traction in this case is your current status – where you are in your company’s lifecycle, and what you have achieved. Technology is the product or service that your company is developing. To put it another way, it is “People, Progress, Product”.
Finally, regarding your pitch deck, Travis Ing of Hearst Ventures suggests that companies should have two: “an intro deck of 6-10 slides that you can send out to investors to pique interest (as you try to secure a first meeting), and a main deck of 10-25 slides that you present in meetings with investors. After a meeting, this main deck should also be sent to the investor so that they have relevant detail.”
So go ahead, kill your darlings, distill your narrative to the most important sentences and slides, and get ready for a pitch meeting.
Meeting a VC: put your best New York hat on
Julian Moncada of Lerer Hippeau Ventures (LHV) stresses the importance of preparing to pitch in a variety of settings. Every VC has slightly different formats for meetings and you'll find that they vary in length, formality and audience size. Julian suggests that entrepreneurs should “practice a pitch in a few different formats including: 2 minute pitch, 5 minute pitch, 10 minute pitch, 15 minute pitch, etc., and practice pitching with and without slide decks. Overall, most VC's will accommodate how a founder would like to lead a meeting, but it can help founders feel more comfortable if they prepare for slightly varied situations.” He would also recommend founders try to leave time for questions in each pitch meeting, no matter the length.
And what do you say, exactly? Take the advice of Adam Rothenberg of BoxGroup: “When telling your company story, try to balance providing the larger vision and what your company will look like at scale along with going into detail about the early stages and the initial go-to-market. The best pitches navigate both of those pieces elegantly to really drive home the tactical with the larger narrative."
Laurel Touby of Supernode Ventures (formerly Flatiron Investors) points out some specific no-no’s:
“For founders of companies that pay commissions or must pay suppliers (think marketplaces, AdTech, etc.), don’t exaggerate your revenue numbers by calling them “sales.” I am noticing founders plumping up their numbers in decks by calling gross revenues ‘sales.’ Tell me your actual sales, which are ‘net revenues’ — after those big costs/commissions are paid. All truths come out in the diligence, so why bother obfuscating in this way?”
That echoes the advice of Joshua Seigel of Rubicon Venture Capital: be honest when pitching. It is easy to uncover the truth with lots of data points available to investors, and reputation is an important asset for entrepreneurs to have – companies may come and go, but reputation remains.
Furthermore, it helps being open-minded and proactive. I always cite what Eliot Durbin of Boldstart Ventures mentioned during one of our panel events: Ask for advice and you’ll get money; ask for money and you’ll get advice.
Finally, Lucas Nelson of Evolution Equity Partners reminds entrepreneurs not to ask VCs to sign non-disclosure agreements. They just won’t.
In closing, we would encourage you to treat VC fundraising efforts as a source of funding. To borrow from Oscar Wilde, there are two tragedies in life: one is not getting VC funding, and the other is getting it. Your company may be better off raising funds via crowdfunding, generating revenue via alternative products / services, or applying for an SBA loan or a government grant. Consider all your options and remember: “the darkest hour is right before the dawn.”