How Founders Can Think Like a VC

Yashad Kulkarni40min

Speaker 1

00:04

Hello and welcome to early stage, I'm Natasha Mascarenhas. And as Jordan mentioned, we are going to be talking about how founders can think like a VC. I'm really excited about this topic because I feel like the best VCs and the best founders have a lot in similarity. They are good at doing due diligence. They are good at finding signal through noise.

Unknown Speaker

00:25

And they're good at

Speaker 1

00:26

managing the ups and the downs that it takes to be behind the scenes building the company. To get us through this topic. We have Norwest Venture Partners. Lisa Wu joining us all the way from Germany. Lisa, super great to have you here. Great to be here. We're going to have Lisa walk us through a really detailed presentation where she'll share her top tips. But in the meantime, and throughout, I encourage everyone paying attention to send in their questions. I will filter them over to Lisa towards the end of the presentation. Feel free to include your name, your company name and what your question is, and we will try to get as many answered as possible. But until then, Lisa, I will hand over the mic to you and hear to hear all about how founders can think like a VC.

Speaker 1

01:12

Thanks so much, Natasha. Hi, everyone. It's very nice to be here with you today. I've been in venture for over 10 years and have heard 1000s and 1000s of pitches. My goal today is to help demystify the fundraising process to help you understand how VCs evaluate your pitch and your business so you can do your fundraise. I wanted to this off by saying that I'll be sharing insights and tactics and how to create an engaging presentation. That said I I'll caveat that this may not be the most exciting presentation that you've ever seen, but I hope the information will be useful for you to create your own. So first, I want to talk about how to get a meeting with a VC. In the years that I've been in Niger, I haven't seen a cold email get funded. This doesn't mean that it doesn't happen, but the likelihood is much, much lower. Many VCs including myself are swamped with emails and strapped with time. So we looked her network to help filter leads, I found that the best way to meet a VC is to network your way to warm introduction. Thankfully though, there are other ways to get to know a VC, for example, one great way is to engage them online. Many VCs are active on Twitter or they write blogs, find people in venture who are tweeting or writing about the area that you are active in and approach them through a thoughtful comment. I also want to note that it's more important for the right people to say yes than for everybody to say yes, every VC has a sweet spot in terms of the type of company the stage of development, the size of the total commitment needed, etc. So do your research and be strategic, find the right VC that is passionate about your space. Another insider tip is check to see if an investor is new to the firm. If so they're probably very focused on building their portfolio. This means that they're likely taking more meetings than other investors at the firm. And if you're lucky, they're also specialized in your category. In the following slides, I'll be discussing what makes a good pitch. I'll start with some general guidance and then move into content specific guidance. I want to emphasize that as the founder and CEO, you have three main jobs, setting and selling the big vision fund raising capital and hiring the management team. All three of these jobs require selling and your ability to do this to sell is sensed during the pitch meeting. So learn to sell, which means learn the ability to tell a compelling story about your company that makes people want to buy in. When creating your pitch deck, remember that you want to tell an engaging story. It's not a data dump. Think of the pitch deck as a story told in a sequence of slides. I often recommend having the headline and each page read as a continuous piece of prose it's stitched back together. Also keep your main deck short 10 to 12 slides, maybe 15. If you can't get the audience excited in 12 slides, you definitely won't get them excited in 40 slides. clearly communicate the value proposition early. If I don't understand what you're doing in the first 10 minutes, then I will wonder how you will sell your vision to customers to employees and to other investors to get them to buy in. This is something that I quite like which is the eyebrow test. And this means with each slide make sure the eyebrows go like this green face. Wow. Tell me more. Next slide fibers up Wow, tell me more. Next slide. If they're furrowing, like this blue face or skeptical like this yellow face, it means that your slide needs to be reworked. Your goal is to allow the investor With up with a clear and engaging meeting to get to a second meeting. Sometimes founders like to tell jokes as a way to break the ice or connect with the investor. steer away from rehearse jokes. People have different senses of humor, humorous, and they often fall flat just just don't do it. And I also want to highlight that it's important to be present during the meeting and connect with your investors, not your PowerPoint slides. Avoid reading a speech or sticking stubbornly to a script. So make eye contact, pay attention to your body language and engage with each other.

Speaker 1

05:41

And as the entrepreneur, it's your responsibility to lead the conversation, but get ready for questions. Many investors will hijack your presentation and bombard you with questions. See it as an opportunity to engage in show off the parts of your business that serves their interest. A great presentation is interactive with investors ask questions and founders weave in key points in their replies. And because of these questions, be prepared to go out of order. Have a short direct presentation and know your presentation well enough to be able to present it in a random order and show that you can be flexible. Something I also want to share is you do want to be aware about your reaction to questions and interruptions during the pitch because that can also make or break a deal. investors want to see that you're flexible and a passionate entrepreneur, so do your best to be curious and accommodate the investors questions. venture capital is all about calculated risks in each VC has their preference and how to weight the risks to assess whether a business will scale or whether it will plateau. The following set of slides highlight the risk areas that are important to cover in your pitch deck. I found that the largest determinant of a startup success is the CEO. starting a business is super tough, and I'm looking to understand why you as the founder and CEO are passionate to wake up and solve this problem every single day. Age matters less to us than communicating why you have founder market fit potential. At Norwest. We've back to fresh graduates to seasoned executives and the thread that connects them is understanding what unique insights they had that gave them an unfair advantage to solve the problem. I found that the best founders have experienced directly or indirectly, the pain point they're solving and have very deep empathy for the customer as a result, so share why you are the right person to solve this problem. But keep that story to five minutes. Sometimes founders spend 15 minutes on their history, which just does not demonstrate self awareness and good judgment, which are two attributes we look for in founders. Investors are invested in both the idea and the team that executes it. If you've hired team members emphasize the strength of your team. I'm ultimately trying to understand if you've demonstrated the ability to recruit a players and make sure you are aligned as a team and in front of investors. This means don't fight or squabble with your team, you know, keep that out of the pitch meeting, because ultimately, this can erode our conviction that the team has a solid foundation or a healthy dynamic. Another thing we look for is a very large and growing market. Lots of companies get to 15 to 20 million, but they have difficulty scaling from 20 to 100 million plus, and this ultimately becomes a market size question. So showcase a large market on the right side of history. Another risk we look at is product risk. This means Why will the product actually work? You know, so if possible, show early data points and product market fit. This can be incredible quotes from early customers, NPS seats et CIE SAT scores etc. An idea is one thing but getting the customer to pay for the good or service is another. Another risk we evaluate is how will you efficiently acquire customers over time? For example, if you're a consumer company, paid marketing on Facebook gets increasingly expensive as you scale. Do you have an angle to offset this? Are you building a brand that can drive free word of mouth. And beyond focusing on a large and growing market, the best founders have a very strong grasp on the competitive landscape. You know, sometimes I hear founders say there's no competition. And usually this creates skepticism as this is oftentimes not the case. Even Greenfield opportunities have some competitors. So pointing to interact competitors or substitutes will demonstrate a deeper understanding of the market and suggesting that none exist otherwise. And no you your metrics. Not knowing basic KPIs is an easy way to reduce credibility right out of the gate. We as investors want to know that you are living and breathing the business, figure out the most important numbers of your business and have those memorized. If you have an income statement, don't be overly conservative about how big your business can get over time. VCs will haircut, whatever numbers you provide anyways. Another way we think about is financing an exit risk. This means how much money will you need to raise to get to the finish line? It also means Okay, so you're building a company with great customers and healthy revenue. But Will anyone actually care? Who will actually buy it? Or can it go public as a standalone business one day.

Speaker 1

10:36

And this is the last slide. And what I just want to share here is, you know, in the end, a crucial ingredient of a successful fundraiser is appearing confident that your business will grow and be successful. Whether or not this firm will invest. It's when investors feel that they are missing the train is when they really want to get on the train. Conversely, if your demeanor feels desperate, and it will just be virtually impossible for you to raise money. It's like dating. No one wants to date someone who is desperate. They want to date someone who has options. Ultimately, fundraising is a skill, you get better at pitching by pitching. It's one of those things where practice makes perfect. Even if a VC passes on your company. Now remember that a good first impression could lead to introductions to advice and maybe even financings down the road. So I hope these insights and tactics are useful. And now I'd love to open it up to questions.

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