how to pitch to venture capitalists to pitch to vcs... · how to pitch to venture capitalists ......

June 2011

How to Pitch to Venture CapitalistsA Practical Guide

This presentation has been developed to help entrepreneurs refine their initial pitch to potential investors. In addition to Venture Capital funds the concepts are also relevant for presentations to business angels, strategic investors, and other sources of capital.

This presentation continues to evolve - please check the Resources page of our website www.joycapital.com for the latest version. There are also some additional files to help build a financial model, as well as links to useful sources of information for entrepreneurs and investors.

Good Luck!

Graham O’Keeffe

http://www.joycapital.com


© Joy Capital LLP 2011

What VCs Look For

‣ A warm introduction to qualify taking a first meeting‣ High binary upside investment propositions

• You win, you win big• You lose, you lose early

‣ Something that fits their investment profile• But not one that overly concentrates their fund in any one area

‣ Management teams that can work out the answer• Most VCs will back a great management team over a great idea• Paradoxically, management is the one thing a VC can change.....

‣ Capital efficient business models• Early proof of concept and customer adoption with relatively little capital invested• High gross margin leading to strong operating leverage

‣ Deals that their competitors would love to do• Catching the latest hot wave (eg social networking) is what they are paid to do• Consequently VCs can exhibit a herding mentality


The Ideal VC Pitch

‣ Consider it as a journey from A to B‣ Starting the journey:

• You only get one chance to make a first impression• The opening gambit - create an emotional hook

‣ What is the starting point?• They have never seen you before• This is the “final pitch” to all the Partners - they know you well and will grill you• Some people in the room know you, some don’t

‣ Where does the journey end?• They will take this to their partnership meeting• They will make a final decision at their investment committee• They will decide there and then

‣ Get a result• Go for gold - ask for the cheque!• Do not leave it open ended - even if the answer is “no”, get feedback, ask for helpful

suggestions


Pitch Considerations

‣ Format• PowerPoint vs. PitchBook• Product demo (must be bullet-proof)• Video/Audio conference/Webex• VCs will demand print outs “to make notes on” (but actually to skip ahead when

they start to lose interest)‣ Time

• Plan on one hour - 30 minutes pitch, 15 minutes questions, 15 minutes spare• 20 content slides max plus bookends • Avoid the post-lunch graveyard slot

‣ Environment• Get the IT working - projector, internet connection etc. before you start• Where to sit you and your team vs. your hosts

‣ Team• Be yourself - act naturally, be comfortable in your own clothes • Inter-team dynamics will be analysed closely• Rehearse the material, keep it simple


The Three Minute Mark

‣ Many investors consider themselves “intuitive” and will make an emotional decision within three minutes

‣ You are doing badly:• Blackberry’s are out• People flipping through the printed deck• You’re trying to connect to the internet to show your website demo

‣ You are doing well:• Heads nodding in agreement• Your demo is rolling• Questions being asked - how should you respond?

‣ At a minimum the audience should know this:• Customer Value Proposition• Interesting market size• Differentiation (technology, IP, brand, customer base)• How much money you’re raising

‣ The rest of your presentation must build on the first three minutes and provide the rational justification for the initial intuitive reaction


Presentation Essentials and Sequence

‣ Meet and Greet - the First Impression and Opening Gambit‣ Investment Overview‣ Customer Value Proposition‣ Market Size and Structure‣ Competition‣ Differentiation

• Technology/IP• Brand• Customer Base• Market Access

‣ Route to market• Channel structure (direct/indirect/on-line)

‣ Customers• Who/Where/How Big

‣ Management Team‣ Financials‣ Exit Considerations‣ Investment Summary‣ The Ask

The Three Minute Mark

Some people would put this higher up, depends on who’s in the room from the team

Leave no doubt at the end what you’re after - how much, timescales, number of investors.

March 21st, 2010

Universal TechnologiesPresentation to Entrepreneurship Ventures

UT Every Cloud Needs a Silver Lining.....

The opening gambit

The following slides are the absolutely essential ones to have in a deck.


Investment Overview

‣ Universal Technologies addresses the $4Bn market for cloud infrastructure

‣ Our QuickSilver™ line of edge servers leads the market for large enterprises in the US and Europe

‣ Our customers include GE, Goldman Sachs, AT&T, and the NHS‣ We are headquartered in Reading, UK with offshore R&D in India ‣ We own an extensive patent & IP portfolio‣ Our management team has a strong track record in building new

businesses around innovative market-oriented solutions ‣ Our products have high gross margins due to a large software

content, resulting in a capital efficient business ‣ We are raising up to $5m in fresh capital to grow our sales team

primarily in the US to support immediate market demand, and to explore Asia

Always number your slides for people following on a conference call

Strong USPs

Lean, smart organization

Blue chip customers

Great products

Large market

The Ask

Attractive financial profile

Great team

Slide 1

These are the key points you are making


Strong Revenue Growth and Excellent Gross Margins

“Up and to the right”Attractive profitability


Financial SummaryThis can be cut down to size, but it’s the most you should try to fit onto one slide. (Excel template on www.joycapital.com)




Cash Requirements and Funding PlanThis is a great format for explaining why you are raising

capital, the structure and safety margin

In this scenario, the company is using debt to finance working capital (circled), and equity to fund operating losses through to cashflow breakeven


Exit Considerations

‣ Cloud Infrastructure Vendors• EMC, HP, Dell, IBM• Desire to own full stack for end-to-end system solution

‣ Network Equipment Vendors• Cisco, ALU, NSN, Ericsson• Defensive play to address price-point pressure

‣ Cloud Service Providers• Oracle, Amazon, Google• Massive purchasers of infrastructure – may bring much of it in-house

‣ Recent Precedent Transactions• EMC/Isilon - $2.3Bn• HP/3Par - $2.1Bn

‣ Our exit value is over $500m by 2014• Comparable multiples of 3-6x forward revenues

Investors can do this work themselves, but it’s always a good idea to lead them to the answer


Investment Summary

‣ Universal Software is ideally positioned to create significant shareholder value based on its current position in the fast growing cloud infrastructure market

‣ We intend to build on our existing blue-chip reference customers by growing our US sales team growth to support immediate market demand and establishing a position in Asian markets through partnerships

‣ Our products have high gross margins due to a large software content, resulting in a capital efficient business model which we operate with a lean philosophy

‣ Our management team has a strong track record in building and exiting technology-based businesses

‣ This investment offers a high return potential in a relatively near time-frame with multiple strategic exit opportunities proven by recent transactions

‣ We are raising up to $3m in equity and $1m of venture debt to accelerate our growth path with the expectation of closing the round in early 2011

Similar to opening Investment Overview Slide

The Ask

The Offer

Thank You

George CameronCEO, Universal [email protected]+45 7765 4326www.unite.ch.com

Always say “Thank YOu”Make sure your contact details are clear

mailto:[email protected]





Pitch with Passion

‣ Never forget that you are selling shares in your company• A product needs to be positioned in order to sell it effectively

‣ Would you buy a car/computer/guitar/camera from somebody who wasn’t passionate about their product or company?

‣ Be enthusiastic, energized, committed, hungry• American style versus British/European style• But always be genuine - be yourself!

‣ Practice, Practice, Practise• In the shower• With your friends• With other CEOs• With a VC you who isn’t going to invest• At conferences• To your colleagues• To a video camera

© Joy Capital LLP 2011 16

‣ Experience of building internationally competitive companies ‣ Extensive network of valuable contacts‣ Leverage with other organisations (banks, lawyers, access to local

talent pools etc.) ‣ Access to follow on capital ‣ Help raising the next round of money‣ Knowledgeable about exit processes and capital markets

Should make the difference between success and failure

A Great VC Can Offer Many ThingsGet the VC to sell to you!! What are they going to do for you?


Incubation Proof ofConcept

Company Creation

Business Build Out Growth Market

Domination

Funding Sources

VC Funds Public Markets

Growth Funds

Strategic Investors

Seed Funds

University/ Regional VC

Funds

Government Grants

R&D Tax CreditsEndowments

PensionFunds

Bank Loans

Venture Debt

Individuals BusinessAngels

PrivateEquity

Other possible sources of funding:•Business plan competitions•European collaboration programs•Hedge funds•Customer up-front payments

InvoiceDiscounting

Equity returns

Idealogical returns Debt returns

Venture Capital is not for everybody - there are other source of capital thatmay be more relevant depending on the maturity of the business.


Stages of Business Development‣ Incubation

• Maybe a project within a research lab, four people sharing a serviced office with a plan on a whiteboard, or even just an idea sketched on the back of a napkin

• An ad-hoc organization structure, no legal framework, resources often paid for “in kind”‣ Proof of Concept

• As much as a working prototype, or a software demo, as little as an investor pitch• Some agreement between parties on economic and intellectual ownership of the concept, depending

on attribution and investment‣ Company Creation

• A legal entity, employees, an organization (probably chaotic), a shareholders agreement defining economic rights

• People often doing multiple jobs, roles often changed, business plans subject to frequent revision‣ Business Build Out

• The business becomes structured and defined, with clear roles and responsibilities for management, employees, Board etc.

• The business trades, perhaps profitably, but with varying predictability‣ Growth

• Business becomes repeatable, predictable and scalable• Economies of scale may lead to inorganic growth through acquisition

‣ Market Domination• As market leader in a large market, business is able to tap a number of financial resources to

maintain, extend or defend its core business and to expand into adjacent business areas


Early Stage Investors Seeking Equity Returns

‣ Individuals• Investing in their own business, using gains from previous successful businesses, or savings from

themselves or family members‣ Business Angels

• Successful entrepreneurs or business people, investing in others’ businesses, often in collaboration with others (angel networks), and frequently providing business advice or maybe taking a Board seat

‣ Seed Funds• Organized and managed pools of institutional capital, often focused on a particular market sector

such as Web 2.0, investing in very early stage companies• Frequently created as an adjunct to, or allocation from, an existing VC fund• Often unable to follow their original investments due to limited fund sizes and therefore focus on

capital-efficient business models requiring only a single round of funding‣ VC Funds

• Significant pools of institutional capital, professionally managed, and able to invest across a number of investment rounds through to an exit such as a trade sale or IPO

• Will invest in pre-revenue startup or seed stage investments but anticipate a high attrition rate due to the risks inherent in backing unproven ideas, business models, technologies and entrepreneurs

• Fund returns often dependent on one or two “home run” investments to compensate for the multiple losses


Resources

Other links from the Resources section of our websitewww.joycapital.com

Suggested further reading:http://www.powerltd.com/presenting.htm

Suggested further viewing:http://www.youtube.com/watch?v=Nx7v815bYUw



http://www.powerltd.com/presenting.htm

http://www.powerltd.com/presenting.htm

http://www.youtube.com/watch?v=Nx7v815bYUw

http://www.youtube.com/watch?v=Nx7v815bYUw

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