If you are looking to raise money from VCs the article How Venture Capitalists Really Assess a Pitch from the Harvard Business Review is absolutely must reading!
Before Lakshmi Balachandra entered academia, she spent a few years working for two venture capital firms, where she routinely witnessed a phenomenon that mystified her. The VCs would receive a business plan from an entrepreneur, read it, and get excited. They’d do some research on the industry, and their enthusiasm would grow. So they’d invite the company founder in for a formal pitch meeting—and by the end of it they’d have absolutely no interest in making an investment. Why did a proposal that looked so promising on paper become a nonstarter when the person behind the plan actually pitched it? “That’s what led me to pursue a PhD,” says Balachandra, now an assistant professor at Babson College. “I wanted to break down and study the interaction between the VC and the entrepreneur.”
I’m just going to list her findings as bullet points, with one exception. Read the full article to get the valuable details;
Trust beats competence.
Gender stereotypes play a role.
Particularly among angel investors, who get involved earlier than traditional VCs do, decisions aren’t driven only by potential returns; they are driven by ego as well. Most angel investors are experienced entrepreneurs who want to be hands-on mentors, so they prefer investments where they can add value. For that to happen, a founder must be receptive to feedback and have the potential to be a good protégé.
This last point is of course a vitally important finding to me as someone who spends a lot of time mentoring entrepreneurs and reviewing investor pitches. What founders need to realize is that raising capital is actually a sales process, the investor is paying your company for equity in the company. You are a sales person and your product is company shares. So note Dr. Balachandra’s conclusion well:
The most important takeaway for entrepreneurs is this: You should approach the pitching process less as a formal presentation and more as an improvisational conversation in which attitude and mindset matter more than business fundamentals. Listen hard to the questions you’re asked, and be thoughtful in your responses. If you don’t know something, offer to find out—or ask the investor what he or she thinks. Don’t react defensively to critical questions. And instead of obsessing over the specifics of your pitch deck, Balachandra advises, “think about being calm, cool, and open to feedback.
And you might read my post Sales calls as a conversation, not a sales pitch.