Tips For Start-Ups: Pitching VCs In The Recession

Given the recent declines in venture investment, what are VCs looking for these days.  What does it take to get their attention?  Some of these questions were answered by the panelists at Pitching Venture Capitalists: Startups Uncensored on Monday night.  The panel included Nate Redmond, a Partner at Rustic Canyon Venture Capital, Mark Suster, a serial venture backed entrepreneur and current Partner at GRP Venture Capital, and David Stern, Partner at Clearstone Venture Capital.

First of all, what are the best ways to meet a VC?  The best ways are:

1. through lawyers who work with the VC community,
2. through executive recruiters,
3. by connecting with the VC’s own portfolio companies, and
4. by reaching out to other entrepreneurs

Second, what are the minimum standards for companies approaching VCs in this environment?  What metrics have to be achieved?  The panelists said:

1. the company should not have a product risk (some customer validation required),
2. there should be minimal team risk (management should have relevant experience),
3. there should be little sales or marketing risk,
4. the company must be able to define its value proposition,
5. as a corollary to the value proposition comment, the company must understand its business model and be able to explain it,
6. management must be able to demonstrate the trajectory of the business in terms of its own measurements (customers, sales, transaction size, market share, etc.),
7. management must be very cost-conscious (no pre-2001 style extravagance), and
8. executives should network their way in to the VC firm.

Third, when it comes to the investor presentation, what are the keys to getting and keeping a VC’s attention?

1. selling oneself to the VC (by focusing on past successes and explaining how this minimizes team risk),
2. explaining one’s passions for the product/service/market,
3. defining the vision for the company, and
4. describing the company’s future goals.

On the other hand, the best ways to blow the presentation are:

1. to not match the company’s market to the VC’s stated interests,
2. to not have any meaningful insight on the business sector/industry,
3. to not acknowledge the existence of challenges (e.g. the know it all problem), and
4. to have a one-way conversation so as to prevent the VC from asking questions.

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