Partnerships between VCs and talented entrepreneurs have allowed some of the most famous startups in history to become household names. Facebook, Twitter, Spotify, and Google can attribute some of their success to the support of savvy venture capitalists who saw their potential in their early stages of development.
Today, many entrepreneurs who seek out VCs go into pitch meetings confident that they will earn financial backing to help them achieve the ultimate level of success. Unfortunately, many of them aren’t aware of the many things that can happen during these meetings that dissuade investors from wanting to support a young company. Listed here are five things that VCs want to tell entrepreneurs about pitch meetings, as well as the factors that can make their company look like a losing bet.
1. Who you present as your management team matters.
It isn’t likely that the structure of your management team during your business’ startup phase is going to look the same when your company becomes a business of scale. Still, VCs take notice of the people you choose to put into positions of leadership in the earliest phases of development.
Beyond having a useful skillset (and the experience to back it up), VCs want to see that every member of your startup team is motivated and has a temperament suited to the demanding nature of building a successful business. Additionally, VCs like to see that at least one member of your early phase startup team has a good grasp of finance. While a financial leader isn’t as crucial when a startup is just beginning, someone who understands cash flow and is able to strategically manage the financial support that VCs offer is important to scaling growth and working to meet investor goals.
2. Your story matters almost as much as your facts.
Every entrepreneur has a story of how and why he or she chose to start a business, and that story matters to the people you’re pitching to—whether it’s an audience of potential customers, talent you want to recruit for a position at your company, or a venture capital firm you hope to bring on board. You still need to have market research, profitability metrics, proof of concept, and a P&L, but your startup’s story, the emotional center of your business, ties the pitch together.
If you can’t tell a genuine story about why you’re starting your business and what you hope to accomplish, you’re not likely to earn the interest of investors, top-tier employees, or consumers—and VCs know it.
3. Be upfront about what you’re really looking for.
VCs place a high value on honesty and straightforwardness in startup founders. Because the relationship between these two entities spans years and must survive the high-intensity process of taking a company from early-stage startup to thriving business, it’s important that communication between these groups be respectful but direct.
When explaining what you’re looking for from a VC firm, keep it simple and be transparent. Plainly state where your company is at in development, what you’re going through, what your struggles are, and what you hope a VC will be able to help with. Asking for what you need may scare off some potential investors, but many VCs appreciate honesty. The right VC partner will see your problems as an opportunity and your honest communication as an asset in the process of working toward the common goal of business growth.
4. Building a relationship before seeking capital can be a major benefit.
As with all areas of business, networking can be a critical step in obtaining VC funding. People who work in venture capital naturally build large professional networks of other investors, CEOs, founders, and research professionals. Using a common connection to get an introduction to a VC before asking for funding can be a useful starting point if you want to secure capital successfully.
The choice to financially support a startup is heavily swayed by the personality and characteristics of the company’s founder. VCs who get to know you as a person outside of the board room can make a more informed decision about what your professional relationship will be like and may be more likely to invest in your startup than if what they know about you is solely defined by how you present yourself in the high-pressure context of a pitch meeting. Consider reaching out to professional contacts to connect with potential VC investors before seeking out a VC who is outside of your networking circle.
5. Having an ego won’t get you anywhere.
It’s indisputable that you have to be confident to be successful as an entrepreneur. If you’ve built your business to the point that you’re able to pitch to a venture capital firm, it’s likely that your confidence in your abilities and your company’s future is strong. However, it’s important to make sure that you don’t let that confidence affect your ego in a way that ultimately works against you.
A prevailing industry myth says that entrepreneurs and VCs are two opposing forces in the startup sector that simply need each other to get along. If you want the support of a high-quality venture capitalist who will be a valuable asset to the growth of your startup, this view needs to be abandoned, and ego needs to be checked at the door to the meeting room.
VC-founder relationships built on mutual respect and a common goal are the most effective at getting your business where you want it to go. Be confident about what you know, but don’t forget to be open to advice when it is offered, and don’t take questions about your company during pitch meetings personally. If you can be self-assured without being disrespectful, and stick to the facts when presenting your business’ case, you may just get the kind of financial partner that can take your startup to heights of success you hadn’t thought possible.