It is always good to be prepared, especially when you are going to a pitching session with a potential investor –a process that can either make or break your fundraising journey.
Even during the pandemic, opportunities to sit down (most likely virtually) with investors and present your business remain abundant. For the newbies amongst us, this process might feel like being shrouded in mystery. Even the more seasoned entrepreneurs might want to hear more about how they can improve their skills.
But just like many things in life, the worst thing that we can do is make assumptions.
This is why we ask Leung Pui Yan (Executive Director at Vertex Ventures Southeast Asia & India), Abhijit Banerjee (General Partner & Managing Director at Decacorn Capital), and Nabila Askandari (Investment Professional at Alpha JWC Ventures) to share their valuable insights on how pitching sessions with VC will be like. This includes details such as the questions that they will ask, the best way to answer them, and most importantly, how you can best prepare for a pitching session.
Make sure you read this before going to that meeting.
Getting ready for a pitching session
Before we can prepare to attend a pitching session, it is important to know what will typically happen in these meetings. The process may vary between different VC firms, but as you may notice soon, there are some similarities.
As Banerjee explains it, the process typically involved a meeting with founder or co-founders which happen virtually over video calls due to COVID-19 restriction measures.
To add more details about the process, Leung elaborates on how the process is being run at Vertex.
Also Read: Pitching from home: How to get investors’ attention in a virtual world
“Typically, I would invite the founders to spend 15-20 minutes or so giving an overview about their startups and their backgrounds. Ideally, the founders would have shared a teaser deck to provide some context about the opportunity ahead of the session,” she begins.
“After the initial overview, the rest of the time would usually be used for Q&A to dive into specific areas that I would like to further clarify. I would also leave the last couple of minutes for the founders to ask me any questions they may have.”
At Alpha JWC Ventures, the initial stage of pitching would be an introductory call with the founder(s) to find out the company’s mission and get to know the team.
“The hearts and minds behind the company are very important to us. We like to understand what brought the founding team together, what inspired the solution to the problem they are trying to solve, and what gives them the edge and advantage to bring it to life,” says Askandari.
“Next, it would be about the business itself. We invest time to learn about their journey –what are the key milestones, headwinds and trends about their business. At this stage, discussions are typically supplemented with data points on unit economics, monetisation and use of proceeds. Ultimately, we seek to understand how far they’ve come in achieving their goals and the value they’ve created for stakeholders.”
The process will culminate with a discussion on how a partnership with the VC firm can help the startup achieve its mission –beyond just securing funding.
When asked about what founders should prepare before attending the meeting, the VCs provided three different answers.
“Founders should be prepared to discuss the team profile, competitive landscape, product roadmap, current traction and future business projections, as well as funding needs and use of funds,” says Leung.
Banerjee reminds us that every VC has its own distinction –and founders should be aware of it before they attend pitching. “Founders should do a very thorough background check and do some research on the VCs they are pitching to. This helps them to ask appropriate questions to the VCs too; this often creates a good impression on the VCs.”
Meanwhile, Askandari stresses the importance of having an effective meeting.
“The most effective and productive meetings are kicked off with a concise explanation of what the founder’s mission and solution are. Those two need to be delivered with clarity and conviction,” she says.
Also Read: 4 ways to boost your preparation for a startup pitching competition
“Founders should have a powerful elevator pitch that will make an impression on a busy audience who hear many pitches on a daily basis. To aid in their storytelling, founders should prepare materials to visualise key industry statistics, commercials and future use of proceeds.”
The big three questions
When asked about the top three most important questions that VCs will ask founders during pitching, the investors share several points in common:
- The problem that they are aiming to solve, how they are going to solve it, and what makes their solutions unique
- Product-market fit, marketing and monetisation plan
- Cap table and founders’ ownership stakes
According to Leung, “… these questions will help us understand how founders’ views about the overall market opportunity and competitive landscape on a high level. On the other, the questions will also shed light on the product and go-to-market strategies, as well as the possible execution risks involved in pursuing them.”
The investors also put a strong emphasis on founders to back up their pitch with documents and data.
“For example, a clear cap table showing the founders and key employees stakes and dilution did with other investors. They should prepare a data room and be ready to open it to potential investors or VC,” Banerjee says.
He also gives an important note about non-disclosure agreements (NDAs).
“Founders should not ask VCs to sign NDAs because in the startup world there are hundreds of similar models … hence, VCs hesitate to sign NDAs unless there is a real need to do so and that there is a very deep due diligence being conducted,” he continues.
Lastly, Askandari stresses the importance of one key aspect of the founders-investors relationship: authenticity.
“Authenticity is a key component in building the right foundation for a long-lasting and impactful partnership between us and the founders. The best founders couple their passion for the cause with sound data points on the industry, a deep understanding of their business strategy and key figures, and an unwavering desire to solve the problem,” she says.
Common mistakes to avoid
Sometimes, it is easier to learn by understanding the things that we should avoid doing –instead of just the things we should do.
When it comes to pitching, there are different kinds of mistakes that founders often do, starting from the way they present their pitch.
Also Read: How should founders dress when pitching your startup to a VC?
“Not demonstrating strong conviction for their businesses, poor articulation of how the startup is different from others, not having a clear view of future key milestones and funding requirements to achieve them,” Leung lists down the issues.
Banerjee warns about the company’s funding history. “Founders often raise early money from angels, friends, family and dilute themselves a lot even before they raise VC money,” he says.
Askandari closes by stating the most fundamental mistakes of them all: coming in unprepared.
“Founders should expect to be challenged and be prepared to defend their position with conviction. Information on competitors, customers and other stakeholders are areas that founders should have sound knowledge on too,” she stresses.
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