Jan 3
What Startups Should Say During A VC Pitch
In this collection we dive in what your pitch should contain, and what a VC wants to learn and hear about your startup.
Read also the collection of items that you should NOT say at a VC pitch: What Startups Should Never Say During A VC Pitch.
1. Company Overview
The VC wants to know who you are.
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What VCs want to know |
1.1 |
What do you do? |
1.2 |
How old is the firm and what key milestones have you already met? |
1.3 |
Who are your customers and partners? |
1.4 |
Who are your existing investors and what is your financing history? (Dollars in, valuation, date) |
1.5 |
Tell VC about this round |
1.6 |
What is the investment opportunity for me? |
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Common mistakes |
- Lack of clarity of what you do.
- Put the “WOW” up front.
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Smart Strategy |
- Emphasize relevant experience.
- Borrow credibility from customers and partners.
- Bootstrap the startup to the first milestones.
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2. Investment Opportunity
The VCs should understand here why they should be excited. This section is about the part where the elevator pitch comes in.
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What VCs want to see |
2.1 |
Is there a large market opportunity? |
2.2 |
Is this a unique, compelling solution that is validated by early customers? |
2.3 |
Do you have an unfair market advantage? |
2.4 |
Is this the right team for this opportunity? |
2.5 |
Are the returns going to be venture-scale?
Which means, can the VC expect to make 5x-10x within 5 years of investing in the startup. |
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Common mistakes |
- Not clear what this is all about.
- Poor pacing.
- Lack of impact.
- Startups makes claims that cannot be substantiated
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Smart Strategy |
- Get the VC excited now.
- Borrow credibility from customers and partners.
- Be confident, crisp, credible, and compelling.
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3. Business Problem
The VC wants to know if this is a compelling problem.
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What VCs want to know |
3.1 |
What market are you addressing? |
3.2 |
Who is your customer? |
3.3 |
Where and how serious is the pain in the market? |
3.4 |
What are the market factors forcing the change? |
3.5 |
What’s wrong with the existing solutions? |
3.6 |
Is the pain really serious enough for customers to work with a startup? |
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Common mistakes |
- A nice-to-have but not a must-have.
- Belief that the technology is compelling by itself.
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Smart Strategy |
- Startups works with customers as design partners.
- Startup has a customer advisory board.
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4. Unique Solution
The VC wants to know if the startup has a compelling solution.
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What VCs want to know |
4.1 |
What exactly is the product or service that customers buy? |
5.2 |
What is your value proposition, economically, and other benefits? |
4.3 |
Did customers help define the product? Is this solution broadly applicable or a one-off? |
4.4 |
How much does it cost? |
4.5 |
Do you have a whole product solution? |
4.6 |
Do you have reference account proof points, ROI and other metrics that you can talk about? |
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Common mistakes |
- No clear business benefit or ROI.
- Faith-based design.
- Sounds like a consulting business.
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Smart Strategy |
- Startups works with customers as design partners.
- Startup has a customer advisory board.
- There is an external market validation/research.
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5. Underlying Technology
The VC wants to know if this is hard to do and thus hard to be duplicated by a competitor.
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What VCs want to know |
5.1 |
How does it work? |
5.2 |
What is the secret sauce? |
5.3 |
How hard will it be to productize the technology? |
5.4 |
Is the product finished? Is this the release we are betting on? |
5.5 |
Are the most important elements patent-protected? Are provisional patents filed? Is there a world-wide patent filed? |
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Common mistakes |
- Too much detail for non-specialist VCs.
- Too much customization needed to have scalable sales and support.
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Smart Strategy |
- Simple diagram showing how this fits into customer’s environments.
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6. Target Market
The VC wants to know if this is a venture-scale market, that gives the return that a VC expects, which is typically 5x-10x the invested amount within 5 years. This varies by industry.
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What VCs want to know |
6.1 |
What is your primary market? |
6.2 |
How big is the market today and tomorrow? |
6.3 |
What’s the Compound Annual Growth Rate (CAGR)? |
6.4 |
Are underlying market forces driving this growth rate? |
6.5 |
What is the key market bet we are making? |
6.6 |
What is your market share at break even? |
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Common mistakes |
- Market is too small.
- Growth is anemic.
- There is a lack of focus. Startup is pursuing too many markets or niches.
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Smart Strategy |
- 3rd party analyst data backs the claims and concurs with your own pipeline.
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7. Go-to-Market Strategy
The VC wants to know if the startup can build the business.
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What VCs want to know |
7.1 |
What;s your unfair business advantage? |
7.2 |
What’s the sales model?
- Channels and partners
- Pricing
- Sales cycle
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7.3 |
Can the startup sell efficiently? |
7.4 |
What is the world domination strategy? |
7.5 |
How much sales visibility does the startup have for this and next year? |
7.6 |
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Common mistakes |
- Stating that “our technology is so much better than the competition.”
- Stating that “if we build it, they will come.”
- It’s a science project, not a business.
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Smart Strategy |
- Have a go-to-market partner, but don’t bet the farm on him.
- Show a credible sales pipeline.
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Enterprise Go-to-Market
The startups should think beyond direct sales. Consider also:
- OEMs
- Strategic investors
- Telesales
- Sales 2.0 tactics
- heavy use of web
- viral marketing
- low touch techniques
- low cost of customer acquisition
- SMB markets
8. Competitive Landscape
The VC wants to know if the startup is meaningfully ahead.
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What VCs want to know |
8.1 |
Who are your primary competitors? |
8.2 |
What do you do better than anyone else? |
8.3 |
Are the key advantages which the startup highlights really important to customers? |
8.4 |
Is the differentiation sustainable? |
8.5 |
Where is the startup vulnerable? |
8.6 |
What is your Gorilla strategy? |
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Common mistakes |
- Startup claims “we have no competition.”
- Startups doesn’t know existing competitors.
- Startup is narcissistic about small differences.
- Startup focuses on features more than benefits to the users.
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Smart Strategy |
- 3rd party reviews and customer references.
- Startups differentiates on business attributes, and not just technology.
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9. Financials
The VC wants to know how capital efficient the startup is.
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What VCs want to know |
9.1 |
What is the survival strategy? |
9.2 |
What do the 2-3 years profits & losses look like? |
9.3 |
What’s the burn rate (monthly cash use)? |
9.4 |
What’s the break even look like?
- number of customers
- revenue
- market share
- employees
- cash used, cash in bank
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9.5 |
Can the startup get to break even with the current strategy, product, and market focus? |
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Common mistakes |
- Startup doesn’t understand what VCs want to see.
- Claiming a hockey-stick growth.
- Only showing or predicting anemic growth.
- Unrealistically low capital needs.
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Smart Strategy |
- The Pitch deck should have backup slides with more detailed financial information.
- Have a spreadsheet model ready to share.
- Use peer comparison.
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10. Milestones / Use of Capital
The VC wants to know what has to happen for a successful next round?
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What VCs want to know |
10.1 |
What are the milestones and metrics?
- product milestones
- team building milestones
- sales and logos
- partnership milestones
- financial milestones (get to break even)
- operational metrics
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10.2 |
What’s the risk of running out of cash before milestones achieved? |
10.3 |
How will the capital be used? |
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Common mistakes |
- No real business plan (“If you don’t have a business plan, you don’t have a business.“)
- Vague metrics.
- You predict, but don’t show hockey-stick growth.
- You have high risk milestones.
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Smart Strategy |
- Identify peer companies to explain and benchmark your business.
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11. Team
The team is the biggest bet a VC makes.
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What VCs want to know |
11.1 |
Person, title, experience. |
11.2 |
What have they done that is relevant? |
11.3 |
Have you worked together as a team before? |
11.4 |
Have you made investor dollars in the past? |
11.5 |
Does anyone know this business in their bones? |
11.6 |
Who are you missing? What are the hiring plans to fill the position? |
11.7 |
Can we help build out the team? |
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Common mistakes |
- A jailhouse, time-served resume.
- Lack of experience relevant to this business.
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Smart Strategy |
- Have an anchor team member.
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The Dream Team
- Made money for investors in the past.
- Built marquee companies.
- Has startup experience.
- Worked together before.
- Developed class-leading products.
- Dealt well with adversity; turned around company from under-performer to high-impact winner.
- Managed positive M&A or IPO exits.
- Has an excellent contact network in the market.
- Hires well.
12. Reasons to Invest
The VCs want to know why they should be excited.
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What VCs want to see |
12.1 |
Large market opportunity. |
12.2 |
Unique, compelling solution validated by early customers. |
12.3 |
Unfair market advantage |
12.4 |
Right team for this opportunity. |
12.5 |
Venture-scale returns. |
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More
Read also the collection of items that you should NOT say at a VC pitch: What Startups Should Never Say During A VC Pitch.
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