The pitching process is often perceived as a one-way audition in which VCs pluck the lucky few from a procession of hopeful, eager entrepreneurs. At Episode 1 we very much see it as a two-way process in which we not only discover great investment opportunities but also lay the foundations for meaningful relationships that help ensure those investment decisions are sound ones. The way we look at it, we invest in people as much as in businesses, and that idea is the focus of this second in a series of posts that aim to demystify ‘the pitch’.
In the first post of this series we looked at how to put together the kind of succinct pitch deck we like to see from founders. Here, we’ll carry that through to how to approach pitching your business in person.
What’s your story?
Before an initial meeting, we will have thoroughly digested your pitch deck (as long as it is digestible….). While it forms the basis for your presentation, we also see it as a framework for a broader conversation about your business. We want to see the ability of you and your team to communicate, in person, the story of your journey from first starting your company to being in front of us with a convincing argument as to why you are going to be the next big thing.
Every founder and company has such a story. It’s about how you identified the problem you are trying to solve and what motivated you to create the solution. It’s about your background and experience, and your vision for building a high-growth tech company.
We want to see evidence of your tenacity and your belief in what you’re doing. The best idea in the world probably won’t fly if the person running the company is not deeply motivated and driven to break down walls to make it happen.
When we see an entrepreneur with a flair for telling a compelling company story it can be a powerful indicator that they will be good at selling their solution to a potential customer. However, at first pitch it doesn’t have to be a polished narrative arc. As we noted in the previous post, we invest in very technically-minded people, for whom such skills often don’t come naturally. Developing powerful storytelling techniques as part of a Go To Market strategy is one of the ways Episode 1 helps its portfolio companies build out their commercial skills. At a first face-to-face meeting we’re interested in the person or team behind an idea, and whether they will be a good fit with us.
We pitch your pitch
The point of pitching to VCs is to get funding for your business, but that is not an instant yes/no process. If your pitch deck is your opening introduction, the first face-to-face meeting is the second step in a longer process towards an investment decision.
When you meet Episode 1, you will be trying to pique the interest of one or two of us enough for us to champion your business to the rest of the team at the next regular Monday morning meeting. That’s where each of us gets to do the pitching – by promoting to the rest of the team the companies we’ve been impressed by in the previous week. It’s five or so minutes in which we must convince our colleagues that your company is worth checking out.
So, what we need from you in that initial face-to-face pitch is not just what’s great about your business but also answers to the potential objections from a bunch of (purposefully) cynical investors. Put yourself in our shoes and think honestly about what issues your business might face and how you would address them. You want us to leave the meeting with all of those bases covered. That isn’t easy – the nature of such objections are often quite detailed company and industry-specific matters.
It might also seem counter-intuitive at a pitch to shine a light on any negative aspects of your business plan. But an obstacle is only a problem if there is no clear way to get past it. This is cards on the table time. After all, if we take things forward our due diligence process will throw up anything we need to be concerned about. Then, if we get to a deal, there are warranties to sign that require disclosure of anything that might adversely affect the business. From there, further legal hoops have to be jumped through as things progress. But the point is that we need to trust your pitch doesn’t hide any unwelcome surprises.
Most companies will encounter hurdles along the way and so the way you confront and deal with such challenges says a lot about your abilities as a CEO or team.
It works both ways
The worst pitches we’ve seen tend to be the ones in which the entrepreneur talks at us, and not withus, resulting in them missing – or ignoring – every indication from us that we would like to ask a question. We don’t sit passively through a pitch ‘performance’. We want to ask questions, often quite a lot of questions. Failure to pick up on this indicates either arrogance or a lack of basic social skills, neither of which we can easily fix.
The important point here is that the pitch could be the start of a working relationship that could endure for eight or more years. The mentoring, advice and collaboration we offer our portfolio companies lie at the heart of the Episode 1 approach. We really want CEOs and their teams to listen to us. They don’t have to take our advice, but we want them to listen and consider it, and that starts at the pitch. We like people to use their ears and their mouth in the ratio nature gave them….
The basis of the relationships we build with our portfolio companies is one of mutual respect. For us, it’s the ability to have that ongoing conversation and partnership that is such a privilege of investing at such an early stage. As you go further up the investment ‘stack’ to the later stage investors, the relationship changes. We need to feel that potential for such relationships at the first meeting. We put 100 per cent of the weight on the first meeting because it’s the only way you’ll get to a second one.
On a practical level, how you present on the day is matter for your judgment. As we said in the previous post, simple is best, with enough evidence and data to back up your headline points.
It’s fine to dress informally – we don’t really care about how you look – but make sure it’s consistent with how seriously you want your entire pitch to be perceived. Remember, we’re trying to get the measure of you as a person or team capable of growing a successful business venture.
It’s also encouraging when founders show they can attract high quality people at an early stage. Bring other key members of the team along but give them something to do. Let them talk about their area of expertise and tell their stories about how your business will change the world. That said, don’t correct, contradict or cut across each other. Show us you complement one another.
We find it awkward when there are people sitting silently with no apparent reason for being there. And we prefer not to see advisers, board members or third parties that have made the introduction to us. Stick to the team and keep it simple.
To return to the point made at the start of this post, pitching is a two-way process. Ultimately, both parties are going to be choosing one another to some extent. The best companies usually get to choose which investor they want to work with, so VCs have some selling to do. At Episode 1, we welcome this. It’s an opportunity for entrepreneurs to ask us questions and get a feel for how we operate – and not just the other way round.
We believe that pitching to Episode 1 is a rewarding process, whether or not we end up investing in your company. We’ll challenge you, ask tough questions and confront any issues we see in your business plan. You’ll leave with lots to think about, hopefully some sound advice, and a good idea of what it’s like to work with us. In fact, if you treat the pitch like it’s your first board meeting as an Episode 1 portfolio company, you’ll not be far off what to expect if you become one.