Hooking That VC
January 2009Not a day goes by that we are not reminded of the economic recession plaguing businesses. Recently, the Silicon Valley Venture Capital Confidence Index reached its fifth consecutive quarterly low. In the last quarter of 2008, it dropped to 2.77 out of a five-point scale.
“The macroeconomic conditions have become so dire that it’s tough environment to operate in,” says Mark Cannice, executive director of the University of San Francisco Entrepreneurship Program, who compiled the report.
The Index measures and reports the opinions of professional venture capitalists in their estimation of the high-growth venture entrepreneurial environment in the San Francisco Bay Area over the next 6 - 18 months.
Presenting to Venture Capital firms is always tough, but recent events are making this crucial step to getting your business off the ground even more pivotal.
Any man who afflicts the human race with ideas must be prepared to see them misunderstood.
–Henry Louis Mencken, American Journalist (1880 - 1956)
No matter how exciting and important your new idea may be, if you can’t help others understand it they won’t invest their time or money. Here are some initial guidelines. Above all, be mindful of your audience’s experience, and let go of your love affair with the minutiae of your plan.
1. Prioritize and streamline your thinking. VCs are really, really smart. Chances are they will have looked at many similar plans before you walk in their door. They may feel impatient, even insulted, if you dwell too long on the basics. Frame the issues succinctly then quickly move on to your solution. Listen to your listener.
2. Prioritize and streamline your data. You want the VC to get the picture quickly, not be struggling to make out tiny numbers on your spreadsheet. Slow down when presenting detailed data and projections. Check to make sure graphs and tables can be easily read on your portable from five feet away, a guideline that assures effective projection to most screens. As technical insurance, carry a copy of your presentation on a memory stick, and a spare battery.
3. Keep it visually simple. Don’t use a busy background or distracting special effects. Exclude anything that does not add value and increase meaning. Avoid even a single extraneous word or image! Make the fonts larger than look right to you on your computer. Light-colored text on a dark background must be boldface. Use capital letters sparely and appropriately. Check grammar and spelling, so as not to distract your audience from your real message with minor annoyances. The first time you introduce an abbreviation or acronym be sure to speak and/or define the entire term.
4. Assume you will have one hour maximum with the partner. Arrive 10 minutes early to get your preso set up. Discipline yourself to get through your basic presentation in half an hour, even with questions along the way. This way there will be time for the partner(s) to simply engage with you and make the story their own.
5. Do your homework and make the choice easy. If you’ve researched their portfolio and have a rationale for why their company is a good fit, they will be more interested. Are there parallels with their experience? They will like the deal best if they feel they can add some value and thus have a competitive edge.
6. Turn your audience into your advocate. Your first goal is for the VC to remember this first meeting so positively and clearly that he bothers to pitch you with some enthusiasm in the weekly practice/partners meeting. Only if your story (without you) passes will you get to the next stage.
7. Utilize your new advocate. If you make it to the next meeting, it will be with a larger group for a longer time and they will drill down much harder on your facts. Make your advocate look great. Soliciting his guidance also increases his investment in you winning. The many factors at work include whether your advocate has sufficient political clout within the group. Of course, you don’t know whether the group is actually actively investing or just keeping busy scouting. Knowing how to pick which VCs to approach is another topic altogether.
8. Survive Due Diligence. If you make it past that meeting, they will engage someone to perform due diligence. That choice is pivotal. If there are things about your idea or business plan that may not stand up to these pressures, fix them before the first big meeting.
9. Negotiate. If you make it past DD, then it’s all about negotiating the deal. Antenna does not participate in that process, so it’s crucial to have a good attorney on board at that point.
