The First VC Meeting (Post 1 of Many)

I see a minimum of 3–5 pitches per week and often I see up to 10. I also have raised more than $40 million as an entrepreneur and CEO across multiple rounds of venture capital in 1999, 2000, 2001, 2003 and 2005. That means that I have probably pitched maybe 120 investors and received 20 “yes” answers and nearly 100 “no’s.” Well, actually, VCs never really tell you “no”, they just tell you, “interesting. It’s a bit early for us. Call us back when you have a bit more traction.” Which basically means, “No. But just in case you get big against all odds, please come back and see us since I didn’t tell you no.” ;-)

So I’ve developed a sense of what I think VC’s are looking for having sat on both sides of the table. Not every investor will agree with my advice here and when I give this feedback to entrepreneurs they occasionally tell me that it conflicts with what they heard from other investors. My response is always, “many people have different opinions on this topic, I just happen to be right ;-)” … (obviously this is tongue-in-cheek, I follow up with “I’m just one data point, though, so take in many and mix mine into the pot”

The first meeting is often with just one partner of the firm or might be with a principal, associate or analyst. You need to get this person interested in your business and to become your “champion” before meeting more people in the firm. I’ll cover “how to figure out which person at the VC to approach” at a later date.

Begin with you Bio and that of the Key Members of the Team:

I’m passionate about this point. I am always surprised when people jump into their topic and start telling me about their patent pending technology that is going to revolutionize the way that Internet advertising as we know it works. They’ve developed optimization technology for banner advertisements that is going to increase premium eCPM rates by 60% or more. As they’re talking and already on slide 7 I still am trying to decide whether or not I believe them. It sounds very impressive but consider the following scenarios:

1. The person pitching me graduated with comp sci degree of Cal-Tech before working at Overture on sponsored search algorithms before being acquired by Yahoo! and working in the banner advertising division for 4 years. [this is a real world case!]; or

2. The person sitting across from me worked at a consulting firm that advised customers on web strategies. He got the idea when he worked with clients and noticed how poor most customers were at improving their banner CPMs.

Obviously if you’re case 1 and you tell me this before starting your pitch I’m already on the edge of my seat before you tell me your cool idea. But very few people fall into that bucket so what if you ARE case 2? OK, for starters … are you sure you should be doing a start-up in the banner optimization space? Do you have some shit-hot Phd’s on your team developing algorithms?

If not, watch out. I often call this the San Jose problem. I often hear very smart “case 2's” from above pitch me ideas that I think are best solved with “deep technology.” My response is always, “what are you going to do when 3 shit-hot 28 year old comp sci masters from Stanford realize what a big market opportunity this is? They’re going to sleep on their couches in their tiny apartments eating Taco Bell 4 nights a week. They’re going to crank out code and give product away for free to gather market share. They don’t have a mortgage, a wife or private school for their kids to think about. How will you compete with that?” So I sort of think if you ARE a “number 2” (and let’s face it, most of us are) … just think about how you defend against the San Jose problem. Most likely it’s by focusing on something that is either not “deep science” or it is by building something in an area that required deep domain knowledge and can’t be solved by the San Jose entrepreneurs.

Whatever it is that your business is about — and most businesses won’t require “deep” science — make sure that you put your best foot forward on what your background is and why it is relevant to the company you’re building. If your top team members complement your skills well make sure to tell that as well. Maybe you’re not a tech-head but you’ve hired a 23 year old from Harvard with a 1,600 SAT who’s your CTO (another real world example I heard just this week!) And remember that your personal bio is not the opportunity to tell me about what you were doing in high school. All of the rules of the Elevator Pitch apply to person bios: be brief, show enthusiasm, avoid jargon, use numbers and be prepared for a deep-dive if asked.

Finally, just a thought. Your personal bio is no time to be too humble. I saw a lady pitch today (June 5th, 2009). She did a 6–8 minute overview of what her business was and why it was revolutionary. I did the usual in my head, thinking while she was pitching, “I wonder what her background is? I wonder how she got the idea? This sounds like a big idea but does she really know what she’s talking about?” After about 20 minutes into the meeting I finally flipped through a printed deck she gave me and looked for her bio. I found it. She was graduated from Yale with a magna cum lade in architecture and industrial design. No wonder the product she designed was so beautifully aesthetic. She’s obviously very bright. She did a number of years of marketing and advertising work with beauty product consumer-packaged goods companies. It was directly relevant to her new product. Had she told me all this from the start I might have been more engaged in the first 10 minutes. I wonder what was going through her mind that she chose not to lead with this?

Part 2 in the series is here