You landed your first pitch at a venture capitalist’s (VC) office. You’ve practiced the pitch and have your laptop fired up to deliver. So, like a sprinter at the sound of the gunshot, you dive in hard and heavy to make sure you get through the deck. After all, you might only have one chance to excite them with your company’s story. Inevitably, with all the questions the VC throws at you, time expires before you even think about asking questions of your audience.
Don’t let that happen to you. The more you learn about your prospective investor and where you stand with them, the more productive your meeting will be. Start off by asking questions. You may be very surprised at how many VCs are willing to spend time answering them. And be sure to watch the clock and leave time at the end to ask key closing questions. Presuming you’ve already asked the questions from my last post, Top Questions to Ask a Venture Capitalist in the First Five Minutes, here are some of the questions you should consider asking as part of the pitch session.
Question to ask before the pitch:
Tell me about yourself and how you got into venture capital?
If you have done your homework, you should already know something about the attendees in your meeting. Check the firm’s website, LinkedIn page and other sources to learn more about them. If you already have the information, why ask this question? First, asking this question helps to create touch points with your audience. Maybe you went to the same university, had the same major, worked a similar job in the past or know someone who may have worked with them. You may have already identified the touch points from your research, so asking this question gives you the opportunity to talk about those connections. Second, the more you know about what motivates your audience, how they think and what makes them tick, the better you can tailor your story to include things that will resonate with them most.
On what percent of your investments were you the lead investor?
The journey of raising venture capital has a required starting point: finding a lead investor. Some funds lead many investments, while others are designed to be followers. That doesn’t mean that the meeting is a waste of time if the fund usually follows. Followers can be valuable, but you are looking for different things out of them. An interested follower can be leveraged to help you find or close your lead investor. A lead investor can deliver you a term sheet.
How often do you co-invest with others and how many different funds have you syndicated with in the past?
In forming your syndicate of potential investors, it is important to understand which investors may prefer to invest alone, and which would want co-investors. The number of funds that a firm has co-invested with is an indicator of how well connected they are in the venture capital world. A well-connected firm is usually more helpful in bringing in additional co-investors. This is usually true no matter if they are a lead investor or a follower.
Questions to ask after the pitch:
If I call the CEOs of your portfolio companies, what will they tell me about your fund?
Raising investment capital is like marriage without the option of divorce. It is critically important to understand what it would be like to work with your prospective investor.. Good investors respect entrepreneurs that are as concerned about that relationship as they are about the money coming into the bank.
Where do you see the strengths and weaknesses in our management team?
In a venture investment, little is more important than discussions about the roles of the management team. Would you really want to take investment capital from a firm that has a starkly different view of your management team than you? The earlier you start to understand your alignment on this issue the better.
How high is your interest in our company compared to your other investment opportunities?
Entrepreneurs often make the classic mistake of presuming that funding will follow once they convince the venture fund that their business, team, market, technology and plan are exciting. But venture capital is a relative sport. No firm can do unlimited investments during any given time frame. So, which companies get selected for investment is relative to the other deals in the fund’s pipeline. It is better to know in a first pitch that the venture’s interest is tepid than to falsely believe there is high interest. The key measuring stick of their interest is understanding how their attraction to your company compares to others. .
What are the key things you need to be convinced of to commit to visiting us?
One of the classic tenants of a good sales process is “always be closing.” Yet, so many entrepreneurs deliver their first pitch and leave the meeting with enormous ambiguity about whether there will be any next steps. You can be certain that no fund is going to get to a term sheet without visiting your company. So, this is a key milestone you need to focus on achieving after the first pitch. Venture capitalists can suck you dry with information requests. Understanding what hurdles you need to get through in order to get them to commit to such a visit provides focus for the next steps you need to take.