My friend John Mecke has a nice post on his blog DevelopmentCorporate with a link to a video of a presentation by Babak Nivi of Venture Hacks, explaining to Stanford students how to pitch to a VC. Please go to his blog post for the video which is well worth a listen.
If you don’t have 55 mins to listen to the whole video, you can take a look at my notes below. (but do visit John’s blog it’s got lots of good stuff):
Mr Nivi outlines pitching in easy steps/sections (numbered below)
1. Traction
• For investors, the product is nothing, “product without traction is fiction”
• Priorities for investors are (in order): profits, revenue, customers (and details about the rate of the change)
• You MUST build a prototype. There are no excuses, trim scope if needed. Time, Quality, Cost are the standard 3 dimensions, you normally can pick 2 but you can pick all 3 if you have Scope control.
• He suggested using landing pages with Ad words for research/testing of your market potential
• Good resources he mentioned – Books: Steve Blank 4 steps to Epiphany (Steve is also slated to present at SDForum May 11th but you need to be invited as it is limited to 15 participants), Blog: Eric Ries – Startup lessons learned
2. Introduction
• Need warm introduction to VCs
• Use a middle man such as (in order of preference)
1. Entrepreneur already backing companies
2. Co-investor
3. Industry Luminary (e.g. Eric Schimdt)
4. Lawyers and Accountant
5. Communist
6. Someone an investor met at a party once (LOL)
• Ask your potential middle man
o How do you know the investor
o Why would you want to pass us on
• Avoid getting referrals from investors who declines to invest, but will pass you on to other investors
• How do you get to investors
o Pick up the phone and call everyone you know
o Have your contacts pick up the phone and call too (only 1 email intro)
o Cold calling is ok. Babak Nivi welcomes cold calls as does Michael Moritz (Sequoia)
• Why? Because Deal flow is King in Silicon Valley (Just as content is king in Hollywood)
• If you can’t get an intro, go back to the drawing board
3. High Concept Pitch
• Summarize your business on the back of a biz card:
Hollywood examples:
o Jaws in space = Alien
o Bus on a bomb = Speed
Company examples:
o Flickr for Video = YouTube
o Firefox of media players = Songbird
o Entrepreneur behind the Entrepreneur – Sequioa
o Create your own social network – Ning
• Don’t confuse your tagline with high concept pitch – Tagline is for customers
4. Elevator Pitch “Prime piece of collateral for a startup”
Work on your Elevator pitch (doesn’t have to be delivered by mouth, can be written)
o Don’t focus on your Product. Talk about opportunity, pedigree of team
o Elevator pitch will get you a meeting, the meeting might require a deck (10 slide ppt) if the audience is big, but never use a deck one-on-one.
Example of Marc Andressen Ning’s e-mail/letter elevator pitch to investors contains the following elements:
Introducing Ning to Blue Shirt Capital
Endorsement from middleman
Deck is attached
Ning allows you to create your own social network (what does it do for the customer)
It’s as easy as creating a blog (metaphor)
Growing at xxx (traction)
Pedigree (education and experience/history of team)
Why are you interested in the investor?
Call to action (let’s talk)
5. Deck
• Need it (but don’t use it in your initial pitch). If you create one, have the following elements:
1. Cover
2. Summary
3. Team
4. Problem
5. Solution
6. Technology
7. Market
8. Sales
9. Competition
10. Milestone
11. Conclusions
12. Financing
More info is on the Venture Hacks blog
• Only use a deck for full partnership presentation.
• Partner with people who know how to pitch, you need a compelling pitch/salesman on your team.
• Alternative PPT structure is Steve Blank’s lessons learned deck
• In it he walks through hypothesis then demonstrates actual results in a continuous cycle
• Have revenue projections – “understand your markets and you will sound like a genius”
• Understand the micro – economics of the business (we can get ads that cost x $)
• 3 key elements: Market Type, Macro economics, Micro economics
6. Business Plans (need it but again don’t send it)
• No sophisticated investor reads a business plan
• You can use your business plan to validate your meta plans (i.e. prove out your hypothesis)
AGAIN DON’T SEND BUSINESS PLANS
7. NDAs
• No investor will sign an NDA
• Investors want to reserve the right to invest in your competition
• Don’t send anything that you need to keep secret
• Assume that as soon as you send anything it will appear on WSJ and will get to the competition’s hands
• But it doesn’t really mean much. Ideas are worthless by themselves. Execution is also worthless. Continuously revise your Hypothesis, and assume that you will execute on the wrong path.
• Execution and revision of execution is what counts
Some Q&A at the end
• How important are patents?
Depends on the vertical market you are in. Consumer internet (almost irrelevant) and enterprise software (useful perhaps), Green Tech (critical). Work with multiple advisors in field. Don’t follow all the rules. Lawyers will restrict you. Don’t be preventative.
• Does social impact matter?
Social entrepreneurship, aim to be profitable but producing change for the better is good, but not necessarily a big driver. For example, Apple could be said to have significant social impact with their products.
These are my notes. If you watched the video and feel I missed something, please do leave a comment for the benefit of others.
Also check out these other interesting related links:
- Guy Kawasaki – Top ten lies of Entrepreneurs and Top ten lies of VCs
- Guy Kawasaki’s the art of pitching, “How to pick up a VC“, and “The no-bullshiitake-investor-wishlist“
- More links on this blog post from “Slides that Stick – How to pitch a VC”