Entrepreneurs make a lot of mistakes while pitching to venture capitalists.
As a founder, it's easy to become overly optimistic by your idea, blindsided as you fiercely advocate for your startup to succeed. While it’s this fire that often fuels a company’s success and growth, it can also destroy a startup when it comes to raising capital.
This is particularly important to bear in mind during the brief but important moments when you’ll be pitching to venture capitalists. VCs are pitched to hundreds and hundreds of times, and as such, it’s important to ensure your company stands out. We caught up with four New York venture capitalists to investigate what they’re looking for when a founder is pitching them an idea, as well as what not to do in a pitch meeting. Here’s what we found:
Jessica Peltz, Partner at KBS Ventures
KBS Ventures is the corporate venture arm of the global advertising agency KBS, which is part of MDC Partners. Peltz focuses on early stage investments in startups looking to transform the media and advertising industry.
Built In: What do you look for when a founder is pitching?
Jessica Peltz: One of the most important things I look for is if a founder can communicate their business really concisely. I’m looking to see if this person can articulate the market, the problem and if the person can be relatable. This person is going to need to be able to sell—not only customers, but investors, the press and talent to come on board.
The other thing that we always look for is the expertise a person has that will put them in the position to build a business really effectively and better than anybody else.
The other thing we ask is—’Why now?’ We ask founders, ‘Did somebody attempt this before and did they fail and if so, why did the fail?’
Also, always know who you’re meeting with. Always do your diligence on the investor before you meet with them. For example, you should know what stage they invest in, do they lead rounds, what are their areas of expertise, why do you want that person holding a piece of your company and what value are they going to be able to provide to you? What connections are they going to be able to make? How are they going to help guide you through this journey? These are people you’re going to be working with for a really long time and you want to be sure the right strategic value is going to be there.
BI: What is the #1 piece of advice you would give to a founder pitching to you?
JP: Be concise and communicate well. Have a tight story and anticipate the questions that VCs are going to have.
BI: What’s one thing you think a founder should never do while pitching?
JP: Never say you don’t have competition. You’re always going to have competition. There’s always going to be indirect competition, there’s always going to be direct competition and there’s always going to be the threat of an incumbent over something similar. Be really smart in terms of being able to articulate the landscape, why you carved out a white space and why you’re approach is going to be really defensible.
Claudia Iannazzo, Partner at Pereg Ventures
Iannazzo has facilitated more than $10 billion of acquisitions, divestments, IPOs, alliances and partnerships for public companies and new ventures around the globe. She started her first company while in college and has continued to work with entrepreneurs throughout her 15-year career spanning five continents.
Built In: What do you look for when a founder is pitching you their startup?
Claudia Iannazzo: There are so many things. But there’s no one thing. Firstly, and probably most importantly, I’m looking for an entrepreneur I think I can work with. Investing in a startup is like getting married, but in many ways, worse. If there’s a fallout between an investor and an entrepreneur, they can’t usually get divorced, they are stuck together. Through good times and bad. Literally until death-do-us-part. And we’re active investors — I spend a lot of time trying to help the companies I invest in — so I want to know that we’re going to be able to have a good relationship, based on mutual respect.
The startup journey isn’t an easy one: you usually hit a few significant road bumps on the journey, and you’re going to need everyone around you to help you get through it. So an entrepreneur who doesn’t understand the value they can extract from their investors, and who just wants me to invest and then go away, probably isn’t a good fit me.
Secondly, I’m looking for a really good idea: not an “iteration” on someone else’s idea, or a “me too” strategy, but genuinely something interesting, thoughtful that solves a very real world problem. And the technology needs to have a very real and defensive point of differentiation (whether it’s proprietary IP, strategic partnership, a “hook” that keeps customers, some complex functionality or a unique growth strategy or roadmap). But the way to think of it is like this: if another entrepreneur, who is a bright technologist, and has $1 million in funding can build exactly what you have built already, then you probably don’t have a deep enough difference (yet). So you may be too early for us, but come back when other entrepreneurs can’t build what you’ve built.
And finally, the fund I invest in does look for traction: you need to have some paying customers. We want to see that you have technology that solves a real world problem that customers value. I’m not very interested in investing in technology that is in search of a market.
BI: What is the #1 piece of advice you would give to a founder pitching you?
CI: Be really clear in how you pitch. It shouldn’t take more than 10 minutes for the other person to get a good understanding of what you are talking about, what problem you have experienced that you are trying to solve, why it matters and why you are uniquely placed to build the business that solves it.
BI: What’s one thing you think a founder should never do while pitching?
CI: #1: Talk non-stop without pauses. Ensure the person you are talking to asks questions and is listening to you. A 20-minute speech with no questions is almost always a pass.
#2: Win arguments with potential investors. If an investor has a different point of view, and you start to argue with them to get them to admit they are wrong, you are almost always going to lose them as an investor (even if you win the argument). It’s better to ask the investor why they have a different point of view: if it’s a strong opinion, often it’s based on a previous investing or operational experience they have had (in which case, you may actually learn something interesting and helpful to your journey). If the investor is just a windbag and has a dogmatic, uninformed and irrational opinion, well learning about that is also important — that type of investor you don’t want.
Andrew Goletka, Managing Partner at Ore Ventures
Ore Ventures is an early stage seed (and pre-seed) venture fund that invests in companies at the intersection of media, entertainment and marketing. Previously, Goletka was a member of investment team at Advancit Capital.
Built In: What do you look for when a founder is pitching you their startup?
Andrew Goletka: It's a people business. We're betting on people as much if not more than whatever is being pitched.
I typically like to get a feel for the whole team and the dynamic between them. I'm partial to lift-outs — where the team has experience working together (in a large or small organization) and knows how one another works along with their strengths and weaknesses. This usually save a lot of time and money. In my experience, these scenarios tend to result in faster and leaner product development, critical when you only have 12-18 months of runway before you need to raise your next round. If it's at a point where we're meeting and it's a team of just one founder/CEO, I look for market understanding and ability to attract talent. Did you just pick a market based on some perceived need or did you study it and believe you could do it better. How convincing are you? Do you have people lined up ready to join? How deep is your network?
You don't necessarily need market experience — understanding tends to be much more important. In fact, I've seen many instances where founders experienced in certain sectors don't have the understanding i'd like to see and an outsider can do a much better job studying and finding opportunities in the market.
BI: What is the #1 piece of advice you would give to a founder pitching you?
AG: Honesty goes a long way. You're not going to always have the answer and it's OK to say that. It's far better than making it up! Investors want to hear the truth and they're generally very good at sensing when someone is making it up as they go along.
BI: What’s one thing you think a founder should never do while pitching?
AG: Say things they know to be untrue and/or embellished. A great example of this is trying to create scarcity by naming all the investors who have committed to investing and/or leading your round when they haven't. It's a small world — assume everyone talks to everyone else. They usually do! There's no need to talk about other investors unless a real round has come together and you're filling the syndicate. There's no faster way to lose an investor than embellish the truth.
Ben Luntz, Co-founder and Managing Partner at Indicator Ventures
Indicator Ventures is an early-stage venture fund focused on opportunities across the digital landscape. Luntz has over a decade of experience as a marketer and operator, with a background working with both large global brands and early-stage businesses alike.
Built In: What do you look for when a founder is pitching you their startup?
Ben Luntz: First and foremost we look for a special team with a great plan. At the end of the day we invest in people and their ability to execute on a plan.
BI: What is the #1 piece of advice you would give to a founder pitching you?
BL: Tell a story. Make sure it’s easy to understand while still being impactful.
BI: What’s one thing you think a founder should never do while pitching?
BL: Don't play games. Just be honest when it comes to where you are with the business, fundraising etc. Anything you’ve misrepresented will bubble up in diligence and detract from your credibility.
Some responses have been edited for length and clarity.
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