By: Renee DiResta (Associate at O’Reilly AlphaTech Ventures)
As a seed stage venture associate, one of my main responsibilities is evaluating new investments. There are typically upwards of 20 first-round meetings in any given week, so I see a lot of pitches. Let’s talk about the most common mistakes people make when presenting, with a particular focus on the first-time pitch.
Not targeting appropriate investment partners
First and foremost, before you start a conversation, it’s important to know that you’re pitching to the right type of investor. If you don’t have a prototype in at least the alpha or beta-test stage, chances are you’re a bit too early for most institutional venture capitalists. Your most likely source of capital will be angel investors. It’s still good to reach out to VCs – we like to form relationships early and watch a product grow – but don’t be surprised to hear, “Let’s keep in touch.”
Besides investor stage, it’s important to choose partners who are a good fit for the particular sector you’re working in. The ideal investor is more than someone who writes a check – it’s a partner who understands your market, and can add value via their expertise and their network. You should typically avoid pitching VCs who have invested in direct competitors, as they will generally not fund a company if there’s a potential conflict of interest.
Asking the VC to sign an NDA
It likely won’t happen. Here are a few great posts by other investors that explain why in more detail.
Not having a deck
A good pitch should be a conversation, with a lot of back-and-forth questions and answers. Some entrepreneurs take this to mean that they don’t need a deck, especially if they have a prototype to demo. While a demo is the best way to convey what you’re doing, many investors (myself included) still appreciate a deck because it acts as an outline for your story. It helps to frame and focus the conversation, and is particularly useful for calling attention to important metrics (signups, downloads, usage over time, etc). It doesn’t have to be anything complicated; in fact, it should be quite simple. A good deck should have around 10 slides, with maybe a few additional for appendix-style materials to respond to anticipated questions. There are many resources out there for how to put together a good deck.
Presenting yourself as technology in search of a problem
While investors love to hear about innovative new ideas, we’re also very interested in what pain point the technology addresses. I want to hear about why your product is necessary. What problem does it solve? Who has that problem? At the early stage, it’s common for an entrepreneur to be exploring several potential target markets, and it’s perfectly acceptable to offer visions for multiple potential markets. Just don’t be technology in search of a problem…make sure you have a sense of who your customer will be, and convey that to the investor.
Misrepresenting the market landscape
This mistake generally takes one of two forms: exaggerating the size of the market, or ignoring the competition. When you think about your market, it’s important to differentiate between “market size” and “addressable market size.” For example, if you’re a K-12 edtech company, don’t describe your market size to the investor in terms of total dollars spent on education across the board at all levels. Talk about it in terms of the market you’re capable of reaching – your specific niche.
Similarly, many entrepreneurs make the mistake of telling an investor that they have no competition because there isn’t a company out there with their exact feature set. You have competition, even if it’s simply pre-existing user behavior. Know what you’re up against, and why you’re different, and be comfortable explaining that to an investor. If there truly is no competition, it’s highly likely that’s because you’re not solving an actual problem.
Not emphasizing why you are the person the VC should fund
So much of early-stage investing is making a bet on the entrepreneur. The product can and will change, so early-stage investors want to fund founders who can adapt and execute. The best idea in the world isn’t going anywhere if the founder isn’t passionate about the problem he or she is solving. So tell us about yourself and your team, not just the idea.
One final point: Many entrepreneurs wonder if it’s worth their time to pitch a non-partner. The reality is that analysts and associates can’t write checks, so if you have a connection to the firm and can get right to a meeting with a partner, go for it. But if not, keep in mind that the junior investor’s incentives are aligned with yours – they want to find great companies, and if they believe in a deal, they will advocate for it and help it through the pipeline. So make sure that you don’t convey a sense that meeting with the junior person is a waste of your time.
A good first meeting is like a good first date. You’ve told your story and piqued the investor’s interest. End the meeting with a discussion about next steps. And prepare for your next meeting by thinking about the questions you were asked; those questions are a pretty good indication of what the investor is most concerned about, and alleviating those concerns will increase your chances of getting funded.
Renee DiResta is currently an Associate at O’Reilly AlphaTech Ventures, where she researches emerging technology trends and supports portfolio companies. Prior to OATV, she spent six and a half years as a trader at Jane Street Capital, a quantitative proprietary trading firm in New York. Renee holds a B.S. in Computer Science and Political Science from the State University of New York at Stony Brook. Follow her on Twitter at @noupside.