As a startup you are used to sitting in the hot seat while the VC (venture capitalist) is grilling you on your business idea, and in the process gives you some advice on how to pitch it better. True, VCs probably know best how it is to pitch to them.
But VCs themselves can improve their pitches as well. I have designed many fund raising presentations for VCs and later-stage private equity (PE) funds pitching their next fund to institutional investors and high net worth individuals. Here are some of the common mistakes in version 1.0 that comes across my desk:
- A lot of attention to the mechanics of the fund; how the due investment process works, and how the fund is organised.
- Very generic descriptions of what sort of companies the fund will be looking for: great product, great management, no competition, sound business model
- (Every fund does this) a chart emphasising that the fund (unlike all other funds) will actually be really hands-on with their portfolio companies
- A dry summary of the investments made and financial returns, forced in the same generic framework that is applied to all the portfolio companies (with completely different stories) often lacking the real story behind the investment decisions and the portfolio’s company progress over time
- Investment banker-style, dense, bullet point slides that are meant for printing and reading, not for presenting.
Investors in VC funds have heard the exact same story from all the other funds that are pitching for their money. VC/PE funds need to really think hard and articulate their story, and how it stands out from other funds.
- For a second time fund, highlight the real story behind your investments, how you picked them, how you made a difference. Track record is the most important aspect institutional investors are looking at.
- Yes, institutional investors can also respond well to more visual slides. The dense stuff can go in the backup or the PPM (private placement memorandum)
- Make the audience excited about the field of technology you are investing in. Where do you think the opportunities are.
- Without mentioning them explicitly, differentiate yourself from the competition / other types of investors that are out there in the market.
Some VC/PE funds have such a track record that they can just pick up the phone and raise a fund by asking the question “Come on, are you in or out?”. For all the other ones, and especially first-time funds, fund raising is as hard (maybe even harder) than the process a startup has to go through. Better get your deck sorted.