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how to effectively approach VC's?

My company is bootstrap with serious traction and momentum on a billion dollar industry.

I want to approach VC's but I don't know what do they spec from me on the first encounter.

What is the best and most effectively way to find VC's in NYC?

If you are a VC what makes your life easier when contacted by entrepreneurs?

17 Replies

Sean Hurley
0
0
Sean Hurley Entrepreneur • Advisor
Strategic Marketing Leader with strong financial results for growing organizations
The best and virtually only way to approach VCs is through a personal close referral. VCs risk tolerance is at an all time low, and what mitigates any level of risk is a personal relationship.
Jonathon Shaevitz
0
0
Jonathon Shaevitz Entrepreneur • Advisor
Founder and CEO, Shoulder Tap Advisors
In terms of finding VC's looking at crunchbase.com, research companies and see who is investing in them. The biggest challenge in approaching VC's cold is that you will get relegated off to an associate who job is to screen business, so they are basically paid to say no. So, a few suggestions.

First, look at related companies and see who is investing in those deals. VC's generally won't invest in a direct competitor to a portfolio company, but they do have areas they favor and understand. So focus on VC's that are already pre-disposed to like your business. Try to get referred into a partner, having a partner at the meeting improves the likelihood that they will take a serious look.

Another thought is to approach strategic players in the industry. They tend to be more wiling to engage in high level discussions at an earlier stage.
Chicke Fitzgerald
8
1
Chicke Fitzgerald Entrepreneur • Advisor
Game Changing Strategist, Advisor & Technologist | Board Candidate | Zigging where others Zag
Your presentation has to be solid and crisp. Here are some tips from investor Guy Kawasaki. It is called the 10/20/30 PPT rule.

The 10/20/30 Rule of PowerPoint

I suffer from something called Meniere's disease-don't worry, you cannot get it from reading my blog. The symptoms of Meniere's include hearing loss, tinnitus (a constant ringing sound), and vertigo. There are many medical theories about its cause: too much salt, caffeine, or alcohol in one's diet, too much stress, and allergies. Thus, I've worked to limit control all these factors.

However, I have another theory. As a venture capitalist, I have to listen to hundreds of entrepreneurs pitch their companies. Most of these pitches are crap: sixty slides about a "patent pending," "first mover advantage," "all we have to do is get 1% of the people in China to buy our product" startup. These pitches are so lousy that I'm losing my hearing, there's a constant ringing in my ear, and every once in while the world starts spinning.

To prevent an epidemic of Meniere's in the venture capital community, I am evangelizing the 10/20/30 Rule of PowerPoint. It's quite simple: a PowerPoint presentation should haveten slides, last no more thantwenty minutes, and containno font smaller than thirty points. While I'm in the venture capital business, this rule is applicable for any presentation to reach agreement: for example, raising capital, making a sale, forming a partnership, etc.

  • Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting-and venture capitalists are very normal. (The only difference between you and venture capitalist is that he is getting paid to gamble with someone else's money). If you must use more than ten slides to explain your business, you probably don't have a business. The ten topics that a venture capitalist cares about are:

    1. Problem
    2. Your solution
    3. Business model
    4. Underlying magic/technology
    5. Marketing and sales
    6. Competition
    7. Team
    8. Projections and milestones
    9. Status and timeline
    10. Summary and call to action
  • Twenty minutes. You should give your ten slides in twenty minutes. Sure, you have an hour time slot, but you're using a Windows laptop, so it will take forty minutes to make it work with the projector. Even if setup goes perfectly, people will arrive late and have to leave early. In a perfect world, you give your pitch in twenty minutes, and you have forty minutes left for discussion.

  • Thirty-point font. The majority of the presentations that I see have text in a ten point font. As much text as possible is jammed into the slide, and then the presenter reads it. However, as soon as the audience figures out that you're reading the text, it reads ahead of you because it can read faster than you can speak. The result is that you and the audience are out of synch.

    The reason people use a small font is twofold: first, that they don't know their material well enough; second, they think that more text is more convincing. Total bozosity. Force yourself to use no font smaller than thirty points. I guarantee it will make your presentations better because it requires you to find the most salient points and to know how to explain them well. If "thirty points," is too dogmatic, the I offer you an algorithm: find out the age of the oldest person in your audience and divide it by two. That's your optimal font size.

So please observe the 10/20/30 Rule of PowerPoint. If nothing else, the next time someone in your audience complains of hearing loss, ringing, or vertigo, you'll know what caused the problem. One last thing: to learn more about the zen of great presentations, check out a site calledPresentation Zenby my buddy Garr Reynolds.



Thomas Duffy
0
1
Thomas Duffy Advisor
Telehealth365
Has your cpa put together a Valuation for your company ?
How strong is your pitchbook?
Do you have a PPM ?
Have you done a Crowd funding campaign to creat Buzz?
Peter Kestenbaum
3
0
Peter Kestenbaum Entrepreneur
Advisor, Investor, Mentor to Emerging firms
Approaching VCs.. Nick if you email me privately ([removed to protect privacy]) I will send you a copy of a 3 hour workshop I do (funding for Aspiring Entrepreneurs). Its been delivered at 5 different university entrepreneurship programs in the New York area, college VC clubs and similar, both by myself and by myself with a VC partner(s). At least 15-20 times in the last 3 years... There are several parts of this question that you need to have in place first.. the tone of your note indicates you might not have a total grasp yet if you are asking the questions you are. - First do you have a company that is a good VC fit... Experience is that many entrepreneurs even with a very viable company are not VC fundable.. There are questions of returns, timelines, scalability (VCs typically are not interested in can't miss 20M companies ,, the economic models do not work for their model). Are you yourself investable. VCs invest in people as much if not more in the team.. Not all members of the team need to be in place yet but the founder has to be either a clear leader (Is this your first rodeo?-- Are you coming out of the industry with 10years as the SVP of product development or marketing) or demonstrate the ability to build the team around him. - It is extremely difficult to approach VCs successfully without an intro.. A typical NY based VC might see 100s of plans or pitches tossed in over the transom each month... Who is your sponsor or link. What VCs have you been exposed to even if it is to be able to say... I see you attended the xyz conference where I presented. Can I buy you a cup of coffee and get your opinion on what we are doing... Your first encounter with a VC if you go this cup of coffee route can (and should) be with a junior member of the firm... maybe even an intern... that can be your intro for your more formal pitch and give you a champion... Get on Linkedin.. Which of friends can intro you. - Is your pitch VC worthy. When I work with entrepreneurs I tell them if they have not given their pitch in formal settings ( a meetup, a pitch to angel investors/partners, industry conferences ) they will fail... There are alot of reasons. Its not the color pallette used in their powerpoint... Its the message they construct, the questions they get, the feedback (did you think about this or adding that to the offering ). - The status of your company. Are you pre or post revenue, what is the status of your angel round? What type of PR do you have? What do your first clients look like ( or if you do not have clients who are speaking with ). How much money do you need? How are you going to spend it? What are the milestones upcoming and so on. - YOU... as I indicated above thats going to be the big driver... So I understand your question... how do I get intro'd but just sense you need some more up front thought process... If that was nailed down not sure you would be asking the question.. Some random tips.. 1. Targt a VC who is in your space... VCs like to invest in what they know.. Generally for example a VC who invests in enterprise software might not invest in a music startup... A VC might have a health care fund... If you are a health care company it makes sense.. If you have a social media play it does not 2. A VC is looking to invest a few hundred K. If you are looking for a 50K or 100K start you are probably more likely to be an angel investment. Even at 200 or 300K an angel network is usually more appropriate... There are some examples of VCs who might invest 50K ( you need to research ) but more frequently than not its individual VCs at those firms who might give you 50K out of their pocket as an angel. Look at other firms in your space. Which VCs funded them. If you find one, then find out which particular partner sits on their board. He should be your target.. ( Dear xxx. I see your firm funded spotify so I know you appreciate our market... I am working on a product named pandora which is in the same space but does xyz... would it be possible to share a cup of coffee with you or one of your staff and get some feedback on what we are doing .... ) best
Gary Ballabio
0
0
Gary Ballabio Entrepreneur
Product and Business Development Leader
Besides going after a large market where the VC thanks they will see a 10x return from investing, it's important to solidly know your numbers and be prepared to answer some tough questions.

* What is your unfair advantage over competition?
* What is your cost for customer acquisition?
* How are you growing users and gamers to your site?
* Why will user stick with your service and not others?
* COGS?
* Growth rate?
* What is your bounce rate?
* Burn rate?
* Why are you looking for funding?

Probably the most important piece is the crispness of your message. You may only get 2 minutes with the VC and you'll want to make sure your message is clear but also show *confidence* to convince the VC that you are the team who will WIN in this market.

Ian Shearer
1
0
Ian Shearer Advisor
Executive Chairman at Parakeetplay
I totally agree with Chicke both in terms of the standard of presentations and also following Guy Kawasaki's 10/20/30 rule.
My background is that I spent 4 years running an Investor Syndicate. One day every month we listened to about 10 Presentations. These presentations were judged the best 10 by our administrator. As these presentations were generally poor I dread to think how bad were the others that were screened out. Please note...the business's behind the Presentations might have been reasonably good, just the Presentations were poor.
In general the Presenters made basic errors like failing to explain (simply) what their solution was and what problem they were solving. I found myself having to listen to the same crap to which Chicke refers.
Equally they failed to appreciate that listening to them was tough...and very few Presenters made it easy. When you are on your 5th Presentation in a day your concentration drops and you just shudder when you hear yet another wannabe Promoter blowing smoke. I found myself desperate for someone who would just come in and make a simple straightforward presentation which was open and honest and recognized the challenges they faced.
Also, if you have a half decent proposal and get to see a VC you will get a lot more than 2 minutes. Typically they will expect 20 minutes for a Presentation and 20 minutes for Q&A.
Some of the posts above over-complicate this issue. The first meeting is simply to get the VC interested and in reality he will make his mind up in the first few minutes...its human nature.
T. A. McCann
0
0
T. A. McCann Advisor
Entrepreneur, founder of Rival IQ, Gist, HelpShare...startup investor, advisor
I wrote a few blog posts on exactly these topics; How to find the right VCs, what questions to ask in the first meetings, how to get prepared...I hope they help - http://www.tamccann.com/category/business/fundraising/ *T.A. McCann* [removed to protect privacy] | http://tamccann.com | Skype: tamccann Latest Tweet: Snapchat Launches a Colossal Expansion of Its Advertising, Ushering in a New Era for the App https://t.co/0oe4AOtrcl Read More
Bill Lennan
1
0
Bill Lennan Entrepreneur • Advisor
Red Rope Social
I'd look for MeetUps where you can try a pitch and get feedback.
I did one yesterday and got great feedback as well as some insight to adjust our sales presentation.
David Austin
0
0
David Austin Entrepreneur
Entrepreneur
Network. You can gamble on throwing your pitch to them out of the box ... even a great pitch ... but you'll have a far better chance of succeeding if you've become part of their network first. Get to know the startup community where you are ... and know who the power players there are. Get them excited about your idea, and let the momentum build. Find out who you hope to have as an investor and who you need to convert to win that investor over. Then go to the investor. Follow Chicke's advice. Excellent advice there. Bill Lennan is right too ... practice your pitch and get feedback. You only get 1 chance to make a first impression ... hedge your bets there.
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