8 Crucial Parts of Your Perfect Pitch for VC Funding of Your Business

As you’ve already learned, VC funding for your business doesn’t come easy…or quickly.  Even once you think you have the right VC and you’ve made your approach to get their attention, the next step can get painstakingly long.  I’m now talking about preparing to make “The Perfect Pitch”.

Take note that it can take some time just to get on a Venture Capitalist’s schedule…sometimes up to a couple months.  You need to understand that just because you’re in a hurry, it doesn’t necessarily mean they are.

First things first: Unless your VC requests it, don’t send a full business plan; they won’t have time to read it.  Also, at this stage, most Venture Capitalists are not going to have anyone sign a non-disclosure agreement.  Therefore, you need to just give them enough information to pique their interest and have a good understanding of what you’re about.

The next thing your potential investor will want to see is your Executive Summary.  This needs to be a “Killer”, while at the same time trying to get it down to a one-page document.  Depending on the industry, this summary could be as long as three pages.

From this initial look at your Executive Summary, they will decide if they want to be pitched in person or possibly over the internet.  You should be prepared for that possibility.  Along with your Executive Summary goes your Pitch Deck…generally a PowerPoint presentation, which will aid them in their decision.

As you’re preparing your Pitch Deck, keep in mind that you want to try and keep your pitch to approximately 30 minutes, even 20, if possible.  Try to stay within a range of 12 slides, only going longer if you have elements of your pitch that warrant more detailed information, such as prototypes.  In this case, you could go as high as 30 slides.

There are eight touch points that need to be a part of your presentation.  The first six are as follows:

  1. Intro – This slide should define your company, your product/service, and your Value Proposition; ultimately, tell them what it is you’re trying to do.
  2. Opportunity – What is the problem you are trying to solve and why should the VC pay attention to YOU; who are your customers going to be…primarily…and how big are the market segments (subsets)?
  3. Solution – Display and/or demonstrate your solution, why someone would want to use you, and explain why you are different.  As mentioned above, this is when slides can go into more detail and get a little lengthier, if you have prototypes to show and explain.
  4. Business Model – This point is of utmost importance! How are you going to make money? What have you already invested to date and what have you accomplished? Provide a road map for where things are headed and what your growth strategies are once you’ve received funding.
  5. Team – This is where you identify your main team players and the strength of your management team; describe your team’s experience in the industry where you are “playing”.  This will also help the VC  know what it is they need to bring to the table.
  6. Competition – Who is your competition? Although you may not think you have competition, there undoubtedly is someone, whether a direct competitor or some perceived competition.  In what way are you defensible?

I know…I promised eight parts to your Perfect Pitch, but have only given you six! In my next blog post, I will provide the last two components, outlining the MOST important part of your Pitch Deck.  I’ll also discuss what due diligence on your part is necessary before all is said and done.  Venture Capitalist funding for your business should now be coming into focus with this part of the process almost complete.

 

 

 

8 Vital Steps to Prepare You for Going After Venture Capitalist Funding

Now that you know the five steps involved in the Venture Capitalist “process”, we can look more closely at each.

So let’s start at the beginning of the process…Prepare…and the steps involved:

  1. Must establish a C-Corp entity structure
  2. Must create a GREAT Executive Summary
  3. Must write a detailed Business Plan
  4. Must prepare a Venture Capital Term Sheet
  5. Must have an attorney prepare a Stock Purchase Agreement
  6. Must amend your Bylaws (or a “Certificate of Designation”)
  7. Right of First Refusal/Voting Agreement for VC
  8. VC Consulting Agreement (if Applicable)

Let me address each of these steps briefly.

First, to obtain VC funding, you can’t be operating as an LLC or sole proprietor; you must be a C-Corp and deal with compliance for that designation.

The Executive Summary is what will open doors to Venture Capitalist companies; and for that reason alone, it must be GREAT!

The Business Plan you will need to prepare at this stage is not your one- to three-page document, but a very well researched, detailed document that you should consider getting proper help to prepare.

The VC Term Sheet is typically a non-binding document that outlines the terms of the deal.  It’s an important investor packet item that says, “Here is what we’re all about and what we’re going to give back in return.”

Obviously, the Stock Purchase Agreement is the document that sets the terms for the VC investment, inclusive of the purchase price, closing date, and conditions regarding the issuance of the stock.  Needless to say, this is a very important document that an attorney should handle and/or review to be sure you dot your “i’s” and cross your “t’s”.

Your Bylaws will need an Amendment (or create a Certificate of Designation) that creates the new preferred stock class and addresses anti-dilution provisions, as well as dividend, liquidation, and conversion rights.  This is an item that you can find great templates for online.

The Right of First Refusal document is important if you will be offering more stock later.  Your Venture Capitalist will want the right to fund it first.  As for the Voting Agreement, Venture Capitalists want board positions and, with that, voting rights.  My position is that the borrower should try and limit this as much as possible. In fact, try to leave it out if they don’t bring it up.

Finally, the VC Consulting Agreement will address any resources and/or management teams that will be brought to the table, the fees involved, how long they will be involved with the company and when they will step aside.

As you can see, just this first step in the Venture Capitalist Funding Process is involved.  You need to be prepared to dig in and focus.  In upcoming blog posts, I’ll address subsequent steps in the process.  In the meantime, if you are now going through it or have been through this preparation process, I’d love to get your insights from the experience.