5 tips for startups pitching for venture capital funding

16 Jun, 2017

Investment can be hard to secure if you’re a startup in the North of England. Yet, despite this, tech companies in the region raised a total of £12.05 million in venture capital funding in the first quarter of 2017, according to the Tech North Investment Index Q1.

To give startups the best chance of securing investment, entrepreneur John Spindler, CEO of Capital Enterprise, recently delivered a pitch workshop to a host of digital companies at KPMG’s offices in Leeds.

Organised by Capital Enterprise North, the workshop featured advice on everything from crafting the perfect teaser deck to helping startups sell their team’s ambition. Spindler’s tips provided a solid checklist to follow when seeking VC funding, and we’ve summed them up below.

1: Plan a knockout ambition pitch

According to Spindler, Brits have some catching up to do when it comes to being as good as their US counterparts at delivering the crucial ‘ambition pitch’:

“Be upfront that you’re ambitious, and tell the story about what motivates you to succeed that you would tell in a bar or at a dinner party. Work it backwards by saying where you’ll be in five years’ time and then trace it back. Say where you’ll be in year four, three, two, one, and where you are today. It won’t happen like that but it shows that you know where you’re going.

“That way, you can answer the question of what you will achieve and how you will make your business two or three times more valuable when you come out of the funding round.”

2: Drum up excitement with a punchy teaser deck

Whet an investor’s appetite with an interesting teaser deck that contains one or two main slides before unleashing a full deck, advises Spindler. A teaser deck can be sent to a list of investors interested in a sector that could make an expected return from investing.

“The teaser deck tells a story that the right investor can understand and, most importantly, get excited about. It should contain claims, a hypothesis and facts that the investor can easily and quickly validate, leading them to request a call or meeting.

“Don’t put cash flow in it, for example, as you need to get them excited before they see finance. Get them to meet you, but don’t give them everything about you there and then. Try and get them to fall in love with what you’re doing first.”

Using an app startup as an example, Spindler also ran through some common teaser deck slide mistakes:

“If a teaser deck is too long, an investor will stop reading. Don’t make it too general either – be specific about what the app will do. Don’t include too many product details or 500 screenshots when a product video will do.

“Include one thing about the product that stands out that the investor wouldn’t have guessed after trying it. For example – it allows people to get from A to B in two seconds – something that screams, ‘wow’! Lastly, don’t belittle competitors, and avoid false or silly assumptions – claiming that you’re the ‘Facebook of X’, for example.”

3: Sell your team’s potential

For Spindler, a common misconception among startups pitching to VCs is that their product should take centre stage, when the focus should lie on the team:

“Startups keep pitching me product when most VCs talk about team. As an investor, I look for credibility and why a team is doing a business. Are they the best people for it, or could I buy a better team from Shoreditch for £300,000? Or could I go to a recruitment firm in Newcastle that pitches fantastic techies to me?

“You may have had a warm start, or people may already love you. Whatever the reason, I’m looking for unfair advantages and things that you can bring that can’t be brought in the market – it’s an unfair world out there.

“When assembling your team, think who would be the best people in Britain to join it and how you would get them to commit. You can then pitch an amazing opportunity that will see you build something great – you just need a small amount of money to do it.”

4: Give a use case when talking about solving a particular problem

If your startup is pitching something that solves a problem, then be clear about who owns that problem, says Spindler, especially if the product is based on complex tech.

“[PayPal founder] Peter Thiel’s hypothesis for success is this: what does a startup have that a big incumbent doesn’t? This is around the secret of why a market can be cracked but hasn’t been. If you’re doing a problem/solution fit then I need to know who the problem owner is.

“I need a use case – especially if it’s deeper tech, which is when you’ll need a product roadmap. It could be that Cisco have a problem and can’t do X, Y or Z. On the other hand, it could be Gill, a stay-at-home mum who spends two hours a day trying to solve a problem.”

“You don’t have to put all of this in a pitch deck – you could do an FAQ and have other documentation to put in a Dropbox folder that answers these specific questions. They are things that investors will ask you for, but you don’t have to have them to hand. Just say that you can get hold of them, and that’s the point where the financials could come in.

5: Be clear about what investment will be used for

When talking investment, Spindler says that it pays to have an idea of what you’ll be using the money for:

“Be clear about how much you’re going to be raising, what you’re going to spend the money on and what you’re going to prove with it. Is it to hire staff that will make your product better? Startups tend to throw in that they’ll hire two developers, for example, when there’s nothing wrong with their product. You would need to be clear about what they would be doing.”

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