The years of painstaking hard work in building a business’ reputation, market, customer base and suppliers is hard enough, but boiling that down into a half hour investment pitch can be an even more daunting process.
Ask any entrepreneur about their business and they will both passionately and eloquently extol the virtues of their product or service. However, taking that enthusiasm and blending it with the vital financials and validity of any business is a fine art and one which often takes years to perfect.
Venture capitalists meet hundreds of prospective companies every year, with each one hopeful that its offering will provide an investor with a unique opportunity. With capital now at a premium and fewer funds than ever active, the need to nail the ‘perfect pitch’ is vital.
Harry Briggs, principal at venture capital firm Balderton Capital, has been on both sides of the fence having co-founded his own business before entering the investment world.
His health drinks company Firefly Tonics received angel backing, so Briggs is well aware of the demands of UK investors and what they are looking for when they get an hour of face time with a pitching business.
For Briggs the pitch is just as much about meeting the people behind the business as it is the business itself.
He says, ‘I guess the key thing about these early pitches is getting a feel for the people: are they smart and inspiring and do they have a clear understanding of the market and a clear vision of their business and product.’
The most important element, he believes, is simplicity. While it is important, and necessary, to get caught up in the small details of running an early-stage venture, being able to relay important details to an investor is key.
Briggs’ biggest bug-bear comes when entrepreneurs attempt to convince him that the process will be easy and comparing it to processes that similar businesses have gone through.
‘We like confidence but they need to realise that what they are doing is hard. Wanting a quick and easy win to get cash rather than looking for sustainable growth is usually a no-no for us.
‘It might be fine for private equity, but we are looking for early-life companies which will want to be involved for several years so we don’t back people without the tenacity for the long haul.’
For Alex Rahaman of StrikeAd, one of the most important things he did in the lead up to pitching was to seek the help of a venture capital acquaintance to garner a neutral third party viewpoint on what he was going to present.
As co-founder and CEO of mobile advertising firm StrikeAd, Rahaman has been responsible for netting £2.32 million of venture capital funding on top of an initial seed round in January 2011.
Its Series A round started in January 2012 when it secured £2 million from DFJ Esprit and ended in July when the business took on three US-based investors and relocated the company to New York.
Rahaman used his connections to link up with a friend who used to be a VC to get some feedback on his pitch document.
‘He spent a lot of time digging into it and was very helpful in understanding the subtle nuances in formatting the flow of the document so I’d encourage any CEO to find a peer to bounce ideas off and spend some time with,’ he says.
‘[My peer] was very good at adding more rigour to the template, making sure that information was shown in the same way and same place on the slide so that it had a nice flow.’
Chaotic information subconsciously equals a chaotic company, Rahaman adds, so a more rigid and consistent approach is better.
Another key element of Rahaman’s funding round, and ultimate pitch, was making sure that he had already built up strong relationships with investment firms before launching the process.
He believes it helps to provide some validity to the business by allowing a potential backer to be aware of when a business sets out, and then meets, specific targets.
‘If you walk in off the street you have to rely on other people’s views, but if you can build those views before the process then great.’
When in the heat of the pitching room, Rahaman says that it is important to not produce pitch document that is entirely reliant on dialogue. Having a few salient images to talk around is not going to help an investor later when they are trying to relay what they have been told to colleagues, he says.
However his biggest tip comes in the form of attitude. ‘Ultimately, walking into the meeting with confidence and giving a sense that you are not there begging for money, that you are offering something very valuable and they need to show you why they are a good partner rather than just a provider of money, is important.
‘So it’s a change in that balance of power when you talk to the VC, looking into their eyes to ask what they can bring to the partnership.’
Practice makes perfect
Technology entrepreneur Peter Hopton has been through the pitching process many times but his latest effort with his liquid cooling business, when he secured a seven-figure amount, had the added twist of a time constraint.
With the Iceotope business incurring some financial difficulties and entering administration, Hopton had to find backers quickly so turned to the Channel Islands to find interested parties.
He looked to the business network service LinkedIn to provide the proof points that he believed his business would need in the heat of a pitching session and to make sure firms were well aware of what they were about.
He says, ‘My approach to VCs in the past is that you don’t just make one entrance to the firm; you make multiple ones by talking to multiple people and building momentum.
‘When you are sitting down with them one of the biggest things they are thinking is “what are my colleagues going to say about this deal”, so if they have already spoken about it with you by way of some warm introductions it can really build some momentum.’
The validation point is an issue also raised by Guy Cookson, co-founder of Azullo. Having successfully secured funding twice for its digital advertising product Respond, Cookson has found that third party validation is the single most important element to take into a pitch.
‘What we did at the first opportunity with Respond is to take our idea on the road to ask for some honest feedback from potential customers.
‘This was invaluable in testing our assumptions, ensuring we had a product that would have market appeal.’
Cookson says that this allowed them to start lining up deals, getting commitments and even bringing early customers on board to use what he describes as a ‘pretty basic product’. He believes that VCs love to see real data in a pitching environment as it gives credibility to everything else.
For Hopton, the pitch itself is less about the financial element of a business and more about the market and the strategy a business will take to tackle that market.
He believes that for any business, even one slightly post-revenue, financials are a ‘dark art’ which are more about justifying how one is going to go about spending the money and that the amount of money requested is the right quantity.
His recommendation is to produce an excel document which has a bit of flexibility so that different scenarios, depending on the hypothetical performance of a business, can be built in there and then talked over in the discussion.
‘You use a formula format so that you can sit down with them and say if it doesn’t go quite as well this is how it will look, and this is how it would look if it goes better: you’re modifying it in front of them in the pitching session.’
Going it alone
Whatever the approach when it comes to producing a PowerPoint presentation or conducting a demonstration, Briggs recommends not packing the room with unnecessary individuals.
Too many people, he believes, leads investors to believe that there is a lack of decision making going on and question who is actually back at the fort running the company at that exact time.
While it comes down to the passion and brains behind the business, in the pitching process preparation is key.