Venture Capital

Pitch Formula
Hosted by Dave Lavinsky

In this training, youre going

to learn three key things:
1. How to find and contact venture
capitalists
2. How to give high-impact, highresults investor presentations
3. How to close the deal

What Youre About to Learn

MODULE 1: How to Find & Contact VCs
MODULE 2: How to Present to VCs to Create
Trust & Interest
MODULE 3: How to Close the Deal

MODULE 1:
How to Find & Contact
Venture Capitalists

Who do VCs fund?

Companies who can scale quickly with an infusion of
capital, and get to an exit event
Primarily technology-based companies

Companies with significant market potential of $50

million, $100 million or more
The 2:6:2 rule
2 losses, 6 break-evens, 2 home runs
VCs need ability to earn 10X return on your company
Show them how you can turn every $1 million of their
money into $10 million

7 Factors to Consider when

Seeking a Venture Capital Firm
1. Location
2. Sector preference
3. Stage preference
4. Partners
5. Portfolio
6. Assets
7. Fit

3 Steps to Create Your List of

Potential Venture Capital Firms
1. Develop a list of VC funds
Growthink University, CapitalIQ, VentureDeal
2. Narrow your list based on 3 factors:
Market sector
Stage of development
Geographic location

3 Steps to Create Your List of

Potential Venture Capital Firms
3. Make sure the VC is active
Press release section and/or Google
News

Identifying the Right Partner at a

Venture Capital Firm to Contact
Partners make investment decisions and
typically take a seat on each portfolio
company's Board
Partners tend to invest in what they know
Look through bios on websites; also
consider connections you might have

Find the Right Partner

The right partner at the VC firm:
Sector focus
Personal connections (sports, universities,
places worked)
Referrals

Contacting Associates and

Venture Partners
Preferable to contact a Partner at a venture
capital firm
Associates - can contact, but they have less
authority and influence
Venture partners or entrepreneurs-inresidence - can also be contacted, but also
have less authority and influence

Contacting VCs
The wrong way: filling out forms on websites
The right way: contact partners or associates
directly

3 Ways to Contact VCs

1. Get an introduction (best)
2. Meet them online or offline
3. Contact them cold

1. Getting Introductions
An introduction gives you priority
6 types of individuals who can introduce
you to VCs
1. Other entrepreneurs
2. Other investors
3. Experts, executives and professors
Importance of Board of Advisors
4. Lawyers, accountants, consultants and others
5. Angel investors and board members
6. The VCs online social networking colleagues

1. Other Entrepreneurs
Entrepreneurs whom the investor has
previously backed or is currently backing
VCs really trust these entrepreneurs
opinions
Use Growthink Research database or
search through bios of VCs portfolio
companies online
Example: Ryan Allis, the CEO of iContact

2. Other investors
Other investors with whom the investor
has co-invested
If you have connections to other venture
capitalists, ask for introductions
Whenever you speak with a potential
investor, you can ask for introductions

3. Experts, executives and professors

Market, product, and technology experts
such as senior executives at dominant
companies or lauded professors
VCs follow industries and attend events and
will know these people, or know them by
name
These individuals have lots of credibility
Also possibly get these individuals on Board
of Advisors

Board of Advisors
Informal version of Board of Directors
Generally have no voting privileges
Provide value in the form of advice, knowhow, contacts and credibility
Typically compensated with equity
Industry executives, successful
entrepreneurs, and professors
Leverage SCORE as needed
Good practice for raising VC
Helpful, not required

4. Lawyers, accountants,
consultants and others
VCs pay these folks and typically have
trusted relationships with them
Consider these relationships when
choosing your professional advisors

5. Angel investors and board

members
Angels and board members often know VCs,
particularly if they are active
If they dont know them directly, they tend to
have large networks to leverage

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6. The VCs online social

networking colleagues
Connect directly or through mutual
acquaintances on networks such as
LinkedIn, Spoke, or Facebook

Leverage multiple
introductions if possible
Google example
Professor David R. Cheriton
Angel investor Andy Bechtolsheim
Angel investors/advisors Ram Shriram,
Ron Conway and Bob Bozeman
VCs

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2. Meeting Venture Capitalists

Online or Offline
As mentioned, many venture capitalists
participate in online social networks through
which you can get introductions to them
Or create relationships with VCs yourself
Find/read their blogs
Comment on them and create relationship

Follow them on Twitter and start dialogue

Attend lots of events (conferences, trade
shows, etc.) (e.g., Kwiry)

3. Contacting Venture
Capitalists Cold
Cold - without an introduction or meeting
them at an event or conference or online
Challenging but can be highly effective
Best strategy is email but NEVER email
posted on VCs website
If email not posted on their site, call the VC. In
email, reference reason why if possible.
Do NOT send business plan. Send teaser
email.

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What Materials to Send And

in What Order
Start with Teaser email
If they suggest more, send Executive
Summary or PowerPoint (whichever you think
is stronger)
Goal of your email communications is to get a
face-to-face meeting
Dont over-shop the deal

3. Teaser Email

Teases VC to want to learn more about your company

5 to 6 bullets about the venture - very short

Goals
Create intrigue and excitement
Show market size is big enough
Prove capabilities of management team
Create sense of urgency

Also helps avoid over-shopping deal

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Sample Teaser Email

Dear [Name],
I am contacting you because I am confident that our company will interest you.
Key facts about our company include:
Leader in developing XYZ technology to improve ABC. Research shows this market is
expected to grow from $x to $y in next 3 years.
Our president is one of the world's leading authority on XYZ technology. He was one of 12
experts worldwide who spoke at the recent XYZ conference.
Our technology provides critical advantages over ABC devices (the technology it displaces)
and other XYZ firms including a, b and c.
200X revenues/grants total nearly $500K.
Key strategic alliances/partnerships have been formed with Partner 1, Partner 2 and Partner 3.
Our company is based in [city/state].
We expect to close this round of financing in the amount of $x million in the next 90 days. Please
contact me directly at [555-555-5555] if you would like to learn more about our company
and/or to schedule a meeting.
Regards,
[Name]

MODULE 2:
How to Present to VCs to
Create Trust & Interest
A. Presentation Basics:
Anatomy of a Great Presentation

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Understand Your Audience

Who are you presenting to?
How sophisticated are they?
What are THEIR needs?
What are THEIR goals?
Are they viewing you with skepticism?

Grab Their Attention

Need to start with a hook could be a story
or interesting fact
Your opening statements should be
memorized
Excite them about whats coming next - in
the next 20 minutes, you will.

15

Dont Overwhelm
We speak to be remembered and repeated
Less is often more when it comes to data
What are the key points that you want your
audience to remember
Dont use $10 words

Use, Dont Abuse PowerPoint

PowerPoint is a visual aid, not a teleprompter
Dont use too much text
6 X 6 rule
10/20/30 investor PowerPoint rule
Get your audience to visualize what you are
saying

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Tell Stories
Facts dont inspire; stories do.
People just arent that good at remembering
facts. When people do remember facts, its
almost always in context. Seth Godin

End Powerfully
Last words linger
Tell inspirational story of realizing vision
Reiterate the key exciting points
Ask for the next step
Memorize your ending

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MODULE 2:
How to Present to VCs to
Create Trust & Interest
B. Leveraging Your T-Factor

Investors and lenders

generally invest in
the jockey and
not the horse

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Build Your T (Trust) Factor

1. Commonalities
2. Appearance
3. Rapport
4. Referrals/Just-mets
5. Authority
6. Evidence
7. Experience
8. Passion

1. Commonalities
What do you have in common with the
investor/lender?
Running?
Kids?

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2. Appearance
Look the part
Rarely go wrong with suit and tie, but may not
fit the part

3. Rapport
People more easily trust those who they like
Likeability ties in directly with
commonalities; we trust those who are
similar to us
Build rapport to build trust
Understand and celebrate their aliveness

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4. Referrals/Just-mets
Referrals to investors automatically breeds
trust and likeability
Referrals AFTER meetings solidifies trust
Waiters and secretaries can kill deals

5. Authority
People trust authority
People listen more carefully and trust more
quickly when information comes from a
source they perceive to be authoritative
Show how you are an authority

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6. Evidence
Information which is corroborated by outside
parties -- research, customers, and firsthand
knowledge (best) -- is immediately accepted
by the audience

7. Experience
Experience personalizes evidence, and adds
additional authority
Having been there, done that breeds great
credibility and trust

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8. Passion
Passion influences others
It stimulates their minds, and their hearts,
building trust and likeability

MODULE 2:
How to Present to VCs to
Create Trust & Interest
C. Creating Your Presentation

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10-Part Investor Presentation Outline

1. Vision

6. Marketing & Sales Plan

2. Summary

7. Team

3. Market Pain

8. Milestones

4. Solution

9. Financial projections/needs

5. Competition

10. Conclusion

SLIDE 0:
COVER SLIDE
Include contact info
Name
Email
Phone
Website

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LOGO
Company Name
Joe Smith
CEO
joesmith@joescompany.com
555-555-5555
www.joescompany.com

SLIDE 1:
VISION
(and Attention Grabber)
Did you know that by 2030, there will be 71.5 million
Americans over the age of 65, which is more than double the
current number yet still no company has figured out how to
.. Well, today, Im going to show you a world in which this
problem is solved once and for all.
Have you ever waited in a long line at a grocery store? And
gotten pretty frustrated. Well, our vision is to make sure this
never happens again. And in the next 20 minutes, Im going
to show you how were going to achieve this.

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SLIDE 2:
SUMMARY
Elevator Pitch
What company does
Key pain solved
Company status
Why exciting/unique
success factors

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Summary
Acme Corp offers.
We solve the problem of.
We launched on [date], and since then, we
have .
Unique success factor 1
Unique success factor 2
Unique success factor 3

SLIDE 3:
MARKET PAIN
Why does the market need
you/what is the problem?
For whom is it a problem?
How big is the pain?

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Market Pain
465,000 new moms each month
Only 12% have time to XYZ
Only current solution costs $Z, which 90% of
new moms cant afford

SLIDE 4:
SOLUTION
How do you solve the pain?
Show/describe your
product or service

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Solution

SLIDE 5:
COMPETITION
How are customers
currently solving their
pain?
What are your competitive
advantages?

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Competition
XYZ company offers this
ABC company offers that
Why we will beat them:
Reason 1
Reason 2
Reason 3

SLIDE 6:
MARKETING & SALES PLAN
What is your plan to
acquire customers?
How long is your sales
cycle?

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Marketing & Sales Plan

Working with these distributors
Have these partners
Will run this campaign

SLIDE 7:
TEAM
Who are the key members
of your team?
What are their credentials/
past accomplishments?

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Team
Joe Smith, CEO
Former owner of ABC company

Ralph Jones, COO

Former VP at ABC company

Mary Thompson, CMO

Former Director at Acme company

SLIDE 8:
MILESTONES
What are the upcoming
milestones that your
company will accomplish?
What is the timeline?

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Milestones

SLIDE 9:
FINANCIAL PROJECTIONS/NEEDS
How much money do you
need to achieve your
milestones? And when?
What are your financial
projections?

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Financial Projections
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
Yr 1 / Q1 Yr 1 / Q2 Yr 1 / Q3 Yr 1 / Q4 Yr 2 / Q1 Yr 2 / Q2 Yr 2 / Q3 Yr 2 / Q4 Yr 3 / Q1 Yr 3 / Q2 Yr 3 / Q3 Yr 3 / Q4
Total Revenues

Need $X

Net Profit

Need $Y

Need $Z

SLIDE 10:
CONCLUSION
Reiterate vision / tell
inspirational story
Reiterate key points &
unique success factors

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Conclusion
We are position to.
Unique success factor 1
Unique success factor 2
Unique success factor 3

MODULE 2:
How to Present to VCs to
Create Trust & Interest
D. Advanced Presentation Tips

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1. Make it look nice

No typos
Visually appealing
PDF version to email to investor after
meeting

2. Iterate
When were investors nodding?
When did they look unengaged?
What questions keep coming up?
Look and listen for feedback, and iterate

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3. Be flexible
Sometimes questions come at end;
sometimes during presentation
Be flexible; he who has the gold, makes the
rules
Sometimes you get to stand; sometimes you
dont generally sitting.

4. Use custom animation

Pop up one key point at a time
Remember your PowerPoint is a visual aid;
you want the audience to look at you

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5. Show confidence
Eye contact
Handshake

6. Rehearsal
Rehearse your slides so you dont need to
look at them for more than a split second
Do mental rehearsal

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7. Do Mock Presentations
Try your presentation on a warm audience
first
The more times you do the presentation, the
more comfortable youll get
Butgive every presentation like its your
first; dont lose your enthusiasm
Stories helps with this

8. Have back-up slides

To answer questions that may come up.
If question comes up most of the time, put it
in main presentation

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9. Follow-Up
Email presentation
Ask for next step

10. Virtual Presentations

Interact more by posing questions for
audience

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MODULE 2:
How to Present to VCs to
Create Trust & Interest
E. Answering Trick Questions

What Not To Say in Your Presentation

We are the greatest.if we just get 1%....
Avoid the hype
VCs have heard it all before
Limit your adjectives and focus on the real
facts
Focus on the VCs needs
Focus on how you can make them money

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How to Properly Answer 3

Common VC Trick Questions
How Much Capital Do you Need and Why?
Really understand your financial model and the
metrics of your business
Be able to answer what would you do with less
money?

How to Properly Answer 3

Common VC Trick Questions
What is Your Valuation?
No number is ever really right
Right answer the market will determine the
valuation
What is Your Exit Strategy?
Right - goal and plan is to build a highly
successful and profitable company
Wrong - will IPO in 24 months

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MODULE 3:
How to Close The Deal

The Term Sheet

Term sheet summarizes the key terms of the financing

agreement
Amount of capital to be raised
The type of stock to be issued
Etc.

Non-binding summary of the key points of the

transaction
Points covered in detail in Stock Purchase Agreement

Term sheet format speeds up the process

VC firms, not the entrepreneurs, prepare the term

sheet

Term sheet shows both parties are legitimately

interested

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How to Maximize Your Valuation &

Better Negotiate Terms

Create a competitive market

More VCs interested in financing your company
More VCs issue you term sheets
More competitive the market for your equity will be
The better you are able to negotiate valuation and
terms

How to Maximize Your Valuation &

Better Negotiate Terms

What about lock-up rights?

Prevent you from speaking with more VCs after
term sheet

Solution - earn multiple term sheets near same

date
Contact series of VCs at the same time and go
through the process with each of them
simultaneously.

Term sheets do expire (exploding term sheets),

but you will have some leeway

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How to Minimize Risk Before

Signing a Term Sheet
Term sheets are non-binding plus lock-up
period
Complete as much business and legal
diligence as possible prior to signing a
term sheet
Can ask: What diligence remains once we
sign the term sheet? Which items can we
complete before we sign the term sheet?

Preparing for Due Diligence (I)

Deep analysis of the investment opportunity
Prepare as much as possible beforehand
Try to get VC to review before term sheet

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Preparing for Due Diligence (II)

Key due diligence items
Management/employee background checks
Business plan
Audited and unaudited financials
All legal and technical documents: leases,
employee agreements, purchase or sale
agreements, patents, etc.

How to Protect Your Business

Ideas When Presenting to VCs
(or Angels and others)

VCs generally do not sign NDAs

Solutions
1. Focus on the Benefits of, Markets for, and
Applications of the IP
2. Stage the divulgence of your IP

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Venture Capitalist Follow-Up

Strategies
Maintain detailed prospective VC
spreadsheet
Include all contacts and status of each
Reply to unanswered emails
Send brief thank you emails after meetings
Keep VCs informed of your progress
Persistence is goodto a point

Approaching Multiple
Investors at Once
It is a good idea to approach multiple
investors at the same time
Your goal is to collect as many term sheets at
the same time as possible
Allows you to create competitive marketplace
for your equity and negotiate best valuation
and terms

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Positioning Yourself to Raise Your

NEXT Round of Capital
Always look towards next round
Possibly hire CFO upon funding
Keys to next round:
Execute on plan; show continued growth
Keep up networking efforts, and keep investors
apprised of your growth
Continue to remove the operational risk factors
Meet with investors well before you need capital

High Concept Pitch vs.

Elevator Pitch

Beneficial, but not required

A high concept pitch is a single sentence that distills

your company's vision
Aliens was promoted as "Jaws in space!"
Bookswim promotes itself as Netflix for books

Allows consumers, investors, and media to instantly

understand what your company does

Easy to spread word about your company. VCs use

to tell their partners about your company

Helps offer proof of successful business model

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Budgeting Time for Raising

Venture Capital

Ideally budget 6 to 9 months for the process

Ideally start creating relationships with VCs

year before requiring capital

Key stages of venture capital-raising process:

1. Create investor communications materials
2. Develop targeted prospective VC list
3. Contact list
4. Meet with VCs and respond to due diligence requests
5. Negotiate the transaction

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