I was at an investment conference a couple of weeks ago waiting for the elevator. Two men were talking beside me. The first was a partner in a life sciences VC firm; the other was an entrepreneur and an unsophisticated one at that because he literally stated, “I’ll give you my elevator pitch.” He directed a rapid-fire monologue at the VC whose eyes immediately glazed over as the entrepreneur rambled on about his startup in waste heat recovery.
Although the VC was looking at the entrepreneur, he had zoned him out for the 22-floor ride to the lobby. When we exited, the VC shook hands with the entrepreneur and quickly walked away. The entrepreneur had bombed with that particular VC. The sad part was that he was probably clueless that he had bombed, learned nothing from the exchange, and would likely make the same mistake again.
There are hundreds of ways to blow it with investors, but this entrepreneur failed in two big ways: he talked at the VC and not with him, and he pitched a deal outside the VC’s space. He was so far away from even getting a look at first base that it was pathetic. He wasted his time and the VC’s.
One of my jobs as a project manager at TVC is to make sure my entrepreneurial clients are ready to engage with VCs. Some of my clients have been through the ropes and know how to interact, but most are seeking equity financing for the first time. We spend hours perfecting the business case and qualifying investors. Before we approach an investor, we know important information about the firm, including:
· Capital under management
· Industry and geographical preferences
· Type of financing preferred: early stage, seed, startup, expansion
· Role in financing: prefers to lead deals or prefers to follow in deals created by others
· Portfolio companies and exit history–has the investor made money
· Size of investments considered
· Current activity level: currently investing or raising a fund
· Management and staff: meeting will be with an associate versus a partner
· Information about the investors that would be useful in a conversation, such as alma maters and work history.
Because investors are deluged with deals, entrepreneurs typically get one meeting. Do your homework before you approach them and make sure you talk with them, not at them.