Many founders I see in mentoring sessions are obsessed with their pitch decks – and with pitching, either in business plan contests, to investors, or both.
But Lakshmi Balachandra, a professor of business at Babson College, has studied how VCs actually assess a pitch and founders would do well to pay attention to her findings.
Justyna Stasik’s article How Venture Capitalists Really Assess a Pitch in The Harvard Business Review has a number of tips for founders seeking investment.
PASSION IS OVERRATED.
Contrary to the received wisdom, Professor Balanchandra’s research found that judges of startup competitions preferred a calm demeanor to a high energy presentation. My guess is that investors want their founders to be cool, calm and collected – especially under pressure such as a business plan contest, since that is how they will need to handle high pressure experiences in their ventures.
TRUST BEATS COMPETENCE.
A second study by Professor Balachandra found that angel interest in startups was driven more by perceptions of trust and character than domain-specific skills. This jibes with my experience, as domain-specific skills like marketing or finance can be learned, delegated or likely hired by a founder. But as a founder you are either trustworthy and high character or you are not. These traits can’t be learned.
Whether your investor is an angel, angel network or a VC firm the probabilities are very high that your investor will have much more experience starting and building companies than you do. And virtually all good investors believe they add value by coaching or mentoring their founders. So you need to be coachable. See my previous post Looking to raise VC funds? Are you coachable?
GENDER STEREOTYPES PLAY A ROLE.
Here’s some great advice from Professor Balanchandra, no matter what your gender or that of your investors:
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.
For more on these issues see the links in the HBR article to Professor Balachandra’s research. And lest you think she’s just an academic, be advised before entering academia she she spent a few years working for two venture capital firms.