Entrepreneurs seeking funding always wonder what they must do to impress a venture capitalist. In this article, a number of prominent venture capitalists share exactly what they are hoping to see when an entrepreneur walks through their door seeking startup funding.
1. Know Your Competition
“I am impressed when someone really understands what their competition is doing. Too often people say they’re ‘the first, or the only,’ and then I do a quick Google search in front of them and turn up 10 others.” —Howard Morgan, Partner/Co-Founder, First Round Capital, New York Investment Focus: Seed financings, Internet, software, mobile
2. Know Your Key Metrics
“Know your KPIs (Key Performance Indicators). Effective entrepreneurs understand what their top priorities are and manage their companies by focusing their teams around a handful of critical metrics that reflect those priorities. I’m always interested when a founder can articulate her KPIs, talk intellectually about her team executing to improve them, and has a clear sense of where those metrics can be in a year or two.” —Josh Stein, Partner at DFJ Venture, Menlo Park, Calif. Investment Focus: Enterprise software and services, SaaS applications, Distributed/Social Media
3. Do Five Key Things
“It’s hard to impress most venture capitalists. They tend to be a skeptical bunch. The entrepreneurs who have impressed me the most do these five things: (1) they convince me they are dedicated , passionate, and know what needs to be done to reach their goals; (2) they show me there is a big market opportunity, that they can capture a meaningful amount of the market, and that they clearly understand their competition; (3) they understand their metrics and financials cold; (4) they demonstrate they would be good people to work with and are not afraid of risks; and (5) they convince me that we could make a kazillion dollars together and have fun doing it.” —Patricia Splinter, Chief Operating Office and Managing Director, VantagePoint Capital Partners, Silicon Valley Investment Focus: Clean tech, China, Internet
“Success is no coincidence—it is 90% preparation. Do your homework on the firm and the individual you are meeting: who they are, what they know, and what they care about.” —Mark Leschly, Managing Partner, Rho Capital Partners, Inc., Palo Alto, Calif. Investment Focus: Digital media, healthcare, software, Internet, mobile
5. Show Some Passion!
“Yes, you need to appear professional if you are going to be starting a serious business, but you need to show some passion and enthusiasm. Start-ups are hard, and they take a long time, and you will need to show that you have the inner drive to get through the highs and lows. This doesn’t mean you have to jump up and down and wave your arms. Perhaps it’s a story about what is driving you to get into your business, why it’s personal, or why there is nothing else you would rather do than spend the next 5 to 10 years living and breathing this idea of yours.” —Deepak Kamra, General Partner, Canaan Partners, Menlo Park, Calif. Investment Focus: Early stage Internet and enterprise software
6. Know Your Financials
“Know exactly what you want to spend your money on. Don’t tell me how long it will last; tell me what you want to prove. The most impressive entrepreneurs communicate the value of their businesses through numbers. A conversation centered on a company’s revenue growth, sales funnel, and customer churn causes an immediate connection with investors because when entrepreneurs position themselves as metrics-driven, it’s as though they’ve entered an investor’s mind. “A CEO’s leadership and marketability can’t be understated either. Sometimes a company looks terrific on paper, but if the CEO doesn’t inspire confidence in the first meeting, this shortcoming will doom the investor’s appetite.” —Mark Patricof, Founding Partner of Mesa Ventures and Founder of advisory firm MESA Global, New York Investment Focus: Early stage Internet and enterprise startups
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7. Convince Me
“There are many standard attributes that venture capitalists look for from an entrepreneur’s pitch. As entrepreneurs get better at making pitches, I’ve found myself engaging with the founding teams that convey the following: (1) a personal story regarding the start-up’s concept; (2) their own market validation, be it customer traction or proof points addressing market gaps; and (3) a sense that they’ve done their homework on my firm, my role, and our potential value-add. The bar has been raised for entrepreneurs to impress venture capitalists, so it’s the extra mile that can make or break the first impression.” —Michael Yang, Managing Director, Comcast Ventures, Palo Alto, Calif. Investment Focus: Consumer Internet applications and services. Particular interest in start-ups and business models that disrupt how offline industries historically have functioned.
8. Show How It All Stitches Together
“I am always impressed by entrepreneurs who can articulate a compelling and credible case for how the combination of their product vision, market opportunity, team, and go-to-market strategy will coalesce into a unique and disruptive opportunity for their business. Successful growth companies are the byproduct of a well-developed plan executed by a passionate team. In my experience, great entrepreneurs are terrific at showing how their performance to date hews to their vision for the business and its potential.” —Phil Dur, Partner & Co-Founder, PeakSpan Capital, Burlingame, Calif. Investment Focus: Exclusive focus on growth stage business software companies
9. Show Me the Big Opportunity
“Make me believe—that the opportunity is there, that it’s a big one, that you’re the person to make it happen. Really listen to questions and don’t pretend you have all the answers but that you’re going to find them. Sell yourself and your team and make me want to come on the journey with you. Understand the fit with me and my firm and tell me how we could help.” —Kevin Brown, General Partner, Reed Elsevier Ventures, London Investment Focus: Our aim is to back entrepreneurs and companies that have the potential to transform the economics or the outcomes of the information, technology, and media industries. We invest in the U.S., Europe, and Israel.
10. Think Big and Bold
“What impresses me most is when a team—and I mean a team—comes to visit and they have a complete and inclusive presentation that defines the opportunity, clearly and concisely explains how their company solves that problem, and exactly how they will change the course of history. Thinking big and bold with authority, we love that!” —Jordan Levy, General Partner, Softbank Capital, New York Investment Focus: Early stage Internet, digital media, software and mobile companies
11. Be Honest and Open
“To impress a venture capitalist, it’s important to be honest and open. Venture investors want to back intellectually honest entrepreneurs that can openly discuss both the strengths and weaknesses of their business. No business is perfect, so hiding a weakness is a losing proposition, while openly discussing the weakness and how you plan to address it will score points and impress a venture capitalist.” —Brian Hirsch, Managing Partner, Tribeca Venture Partners, New York Investment Focus: Early stage Internet, mobile and e-commerce companies
12. Show Me You Are Determined
“We have a saying at Bullpen that we like ‘blue collar’ CEOs. That means that we like to see nuts-and-bolts operators, not pie-in-the sky dreamers. Demonstrate that you’ve spent time looking up our background and investment portfolio finding mutual interests. When sharing materials, keep them brief so I can gather context for a phone call or in-person meeting. In person, I like founders who (1) know their metrics cold; (2) have a clear idea of the business they’re in; and (3) know how to grow it. What gets my attention is a hard-nosed, determined founder who, with a few operational pointers combined with a solid, already existing plan, can get to an even bigger outcome. That’s the kind of ride I want to take.” —Paul Martino, General Partner, Bullpen Capital, Philadelphia Investment Focus: Software-driven businesses
Copyright © by Richard D. Harroch. All Rights Reserved.
About Richard Harroch
Richard Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on investing in Internet and Digital Media companies. He is the author of several books on startups and entrepreneurship. He was also the founder of several Internet companies. He is the co-author of Poker for Dummies and a Wall Street Journal bestselling book on small businesses. He was also a corporate partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, strategic alliances, and venture capital.