Preparing to Meet VCs

Avoiding these 5 common mistakes will help to increase your chances of receiving the venture capital funding that you need to get your ideas off the ground and running.

  1. Relying Too Much on The Idea – When a venture capital firm looks at your idea, they will make the decision on whether or not it will succeed. What these firms are looking for is that you have plans for growth that are realistic and you will need to show them those plans.
  2. Not Being Clear When Explaining Your Opportunity – Venture capital firms are not going to waste their time trying to figure out the details of your opportunity. They will be much more willing to help with financing if your goals, plans, and growth opportunities are clear.
  3. Lying About Credentials – There are people in every venture capital firm that are paid to do extensive background checks on the entrepreneurs who are applying for financing. Don’t overstate. Make sure your information is accurate.
  4. Mistakes or Errors in Your Plan – You must trust the venture capital firm you are seeking financing from enough to share all the key information about your plan. Trying to mislead them will only get you rejected.
  5. Not Knowing Which VC Firms Finance in Your Industry – It is important to not spend your time cold calling venture capital firms that do not finance in your industry. This is a costly mistake that many entrepreneurs make. We recommend that you cold call and email venture capital firms that are relevant to your industry and the stage of your business.

It’s All About The Team

When raising capital for a new company, most novice entrepreneurs and investors focus on the idea. Is it a BIG idea? Does it have legs? How large is the addressable target market? The most common mistakes are talking about capturing 1% of a $500 billion market or showing conservative estimates that the company will go from zero to $100 million since the idea is so great.

Experienced entrepreneurs and investors know it’s all about the team. The reasons are quite simple actually:
• The idea and company you start with will morph with time.
• There will always be numerous mistakes and challenges of all sorts along the way.
• The markets shift quickly and unexpectedly.
• If the idea and the market are indeed good, there will always be competitors with more money, resources, and access.
• Access to capital varies with the mood of the investment community.

A smart, experienced team is one that has the ability to figure this out along the way, without falling in love with the idea itself, showing flexibility, agility, decisiveness, and maturity.

A good team thinks things through in an objective and thorough manner.
How do institutional investors know if you are someone they want to invest in? One of the most key elements is your ability to assemble a team that is credible, has relevant experience, is committed, articulate, and demonstrates integrity. A team that radiates the qualities discussed above.
How do you assemble such a team when resources are limited, and there is little or no cash in the bank?
A good leader has the ability to convince high bandwidth people to follow his/her vision and ambitions. The ability to assemble such a team demonstrates leadership capabilities which are key in the early, turbulent, and uncertain early stages of startups.
So rely less on the idea and more on putting the team together.

How to Make a Good Pitch

“If you can’t make it good, at least make it look good.”
Bill Gates

raise money hero

If you are planning on pitching VCs to raise money for your startup, there are several things you need to know.

First and foremost, you have to understand how VCs work:

 They look for financial returns for their investors (LPs)
 Raise funds
 Find good teams & companies to invest in
 Take “equity”, generally in the form of Preferred Stock
 Help grow them
 Bring managerial and technical expertise, as well as capital
 Control some company decisions
 Help them exit

The key is to understand how to work with them, and what makes them successful. Then you have to be clear about why you should partner with a VC, as the good ones can be great assets:

 Value Add Funds
 Recruiting
 Sector & Domain Expertise & Advice
 Growth & Exit Experience
 Access to Other Investors
 Managerial, Operational, & Technical Expertise
 Objective Advice
 Validation

And of course, what to watch out for, as the wrong partnership could be like a bad marriage. The most important thing is the alignment of objectives, clarity of shared vision, and chemistry. There are many things good VCs offer:

 Guide and support the CEO
 Help develop the team
 Bring strategic expertise and view
 Help identify the best technology stack, markets, product development, sales channels, partners
 Offer networks & contacts
 Help with finding talent, customers, partners, service providers, acquirers
 Provide financial expertise and strategy
 Help with business development
 Advise on an exit strategy

The next thing is identifying the right VC. Because it is important to find the right ones and approach them properly. Most VCs do not take any cold approaches seriously. So you must get a warm intro. Keep in mind the following:

 Sector & Industry Specialization
 Stage
 Check (Investment) Size
 Geography
 Competitive Portfolio Companies
 Dry Powder
 The Right Partner within the Fund
 Track record
 Resources & Mentoring
 Quality of Network
 Technical Expertise & Strategic Relationships
 Chemistry
 Reputation

Then you have to know your timing. As with many things in life, with raising capital, timing can mean everything:

 Sector-specific macro conditions play a significant role:
 Which competitors have sold?
 Which competitors have raised money?
 What is going on with key hires in the sector?
 Is there consolidation occurring?
 Is the sector becoming commoditized?
 Have the key premium buyers already made their bets?

Assuming you have the right team and are raising money at the right time, once you find the right VC, get a warm introduction, and get in front of them, in addition to a first-class pitch deck, they are going to want answers to some key questions:

 How much capital do you need to raise?
 What are your pre-money valuation expectations?
 What does success look like in 12 months?
 Who is on the team?
 What are you using the funds for?
 Who is in charge?
 What’s your go-to-market strategy?
 What if you have to pivot?
 What is your CAC?
 How are you going to recruit talent?

Making the Pitch

 Investors have a short attention span
 You must demonstrate passion & commitment
 Remember, you are a missionary and not a mercenary
 Your ability to build rapport is KEY
 Show a personal connection to the problem you are solving
 It’s all about storytelling
 Do NOT be fixated on the presentation or the solution
 If you can demonstrate the ability to build rapport with the investor, it signals:
 Your ability to recruit employees
 Sell the vision of the company
 Acquire clients
 Raise capital, and of course, deal with other investors
 It is about an 18-month cycle
 Know your landscape, be prepared

It’s all about the personal connection and storytelling

“The history of storytelling isn’t one of simply entertaining the masses but of also advising, instructing, challenging the status quo.” Therese Fowler

  1. Teaser Slide: Make it Clear & Memorable
  2. Elevator Pitch: 30 Seconds
  3. The Problem: BIG Pain that You PERSONALLY Relate With
  4. The Solution: How you are going to solve the problem
  5. Demo: Why You Are Better Than Everyone Else!!!
  6. Market Size: The overall target market and your initial slice
  7. Business Model: How Will You Make Money
  8. Proprietary Tech: What Advantages Do You Have
  9. Competition: Know The Competition and You Measure Up
  10. Go-To-Market Plan: How Will You Get Customers / Channels
  11. Team: Who Is On Your Team
  12. Results: What Have You Achieved So Far
  13. Capital: What Do You Need & How Will You Use It

Many VCs have guest lectured in my classes at USC, and they say the same thing. They look for patterns and usually make up their minds within the first few minutes of the meeting. And the first time CEOs have over 30 meetings before they raise money. So, keep in mind what Theodore Roosevelt famously said, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”

Why UBER Matters, A LOT

“Underlying most arguments against the free market is a lack of belief in freedom itself.”
Milton Friedman

I was recently at the Le Web conference in Paris where Travis Kalanick, the co-founder and CEO of Uber was one of the speakers. It is ironic that the idea for Uber was conceived in Paris, France, where free markets and capitalism are under tremendous pressure.

What makes Uber an extraordinarily important company? In one word, freedom.

Disintermediation is the Internet’s biggest gift. Uber is one of the best examples of how disintermediation can transform industries in which unions, lobbyists, regulation, and bureaucracy have created obstacles to progress, openness, and competitiveness.

This is why wherever Uber operates, unions, lobbyists, regulators, and bureaucrats make every effort possible to block them, make them illegal, or otherwise stop them from operating. The same applies to other companies that are disintermediation of other inefficient industries.

As I travel a lot, I have the opportunity to speak to Uber drivers in different countries. They believe Uber has changed their lives, even the ones that used to own taxis before. What is more, is that they are now genuinely concerned about their ratings and quality of service. When was the last time a cab driver in New York, whose medallion costs one million dollars, showed any concern about his cost, quality of service, or your satisfaction?

Free markets are not about job security, regulations, collective bargaining, or keeping others out. They are about expanding demand and the universe of services and products and growing the ecosystem. It is about creating a bigger pie. It is about execution and providing equal opportunity.
Disintermediation is the key to free markets and equal opportunity. Equal opportunity, however, does not mean an equal outcome.

This is why it is interesting to think about what will happen when “Uberization” is applied to other industries, as it inevitably will!!

This model offers on-demand products and services, choice, quality, value, and of course, accountability. It is highly portable across geographies and industries. It is efficient, scalable, and offers transparency, flexibility, a feedback loop, and competitive, market-adjusted pricing. Such competitive pressures also push out the poor performers and bring down prices.

Clearly, this is not an easy task. Uber has demonstrated world-class execution and has thus made it look easy.

So imagine what if we applied these principles to the industries that need them most? Like health care, education, or government services? Imagine being able to choose your doctor the same way you chose your ride. I know this may be too simplistic, but if indeed this happened, the changes would have incredible ramifications.

Your appropriate medical data would be portable and available to the doctor of your choice on demand upon your selection of that doctor and the service. You will know how much most of your visits and procedures would cost before you select your doctor. The doctor would have to take transparency, accountability, customer satisfaction, and costs.

As disintermediation causes relationships to become more one-to-one, there will be a significant reduction in costs, bureaucracy, and administration layers, which of course is why those whose interests are aligned with the current system will fight this change.

But as Harry Browne said, “Voluntary association produces the free market – where each person can choose among a multitude of possibilities.” So as we cheer Uber on, we wait with anticipation for others to come along and Uberize our other dysfunctional industries, and maybe even government agencies.

10 Secrets of an Effective Presentation

“Brevity is a great charm of eloquence.”
Marcus Tullius Cicero

boring presentation

After having suffered through many a bad presentation, I have come to really appreciate an effective one. But what makes an effective presentation? As F.L. Lucas said, “And how is clarity to be achieved? Mainly by taking the trouble and by writing to serve people rather than to impress them. “ Here are a few key points:

  1. Brevity is Bliss

A friend asked me to sit through a presentation for an online dog food company. The Founder/CEO had spent nearly $2.5mm of his own money and was convinced this was the most important discovery since the theory of relativity. Two and a half hours into the presentation, after I had asked him multiple times to get to the point, I finally stood up, politely told him I could not help him and left the room. Needless to say, he never raised any capital, and clearly, that’s because I am a heartless, blood-sucking VC and banker! As William Shakespeare said, “Brevity is the soul of wit.” If you can’t articulate a business idea in 15-30 minutes, it is not worth pursuing.

  1. Know Your Audience

I once wrote a piece for CNN, which the producer completely altered before publishing. When I asked him why, he simply said, “You are not speaking to our audience.” It is very important to know your audience before presenting anything, to make sure you know their background, experience, interest in the sector, existing investments, level of technical knowledge, and expertise.

Especially when you are pitching VCs, it is important to do the diligence to make sure they are interested in your sector, are currently investing, have dry powder, invest in your geography, do not have any competitive portfolio companies, and focus on your stage, and write the check size you are in interested in. As Annie Proulx said, “I find it satisfying and intellectually stimulating to work with the intensity, brevity, balance, and wordplay of the short story.”

  1. Focus on no More than Three Points

Remember the scene in the movie Amadeus, where his royal highness complained about “Too many notes”. Well, that’s a common issue! There is such a thing as too much of a good thing. As Thomas Leonard said, “Clarity affords focus.” Make sure people leave the meeting remembering the two or three most important points that are your strengths and differentiation.

  1. Nobody Likes History Lessons

H. L. Mencken famously said, “A historian is an unsuccessful novelist.” Most people don’t like history lessons in presentations. If I do not know what you are talking about or need context, I will ask. During a presentation, I want to understand the ability of the presenter to communicate an opportunity, articulate an idea, and demonstrate powers of persuasion.

  1. Focus on the Team – Do Not Rely Too Much on the Idea

People invest in people, not ideas. One of the key elements in a presentation is your ability to demonstrate your team’s credibility, relevant experience, commitment, integrity, ability to execute, and passion. There are many reasons why:

• The idea and company you start with will morph with time.
• There will always be mistakes and challenges along the way.
• Markets shift quickly and unexpectedly.
• If the idea and the market are indeed good, there will always be competitors with more money, resources, and access.

A smart, experienced team is one that thinks in an objective and thorough manner and has the ability to figure things out along the way, without falling in love with the idea itself. Flexibility, agility, decisiveness, and maturity are the qualities investors are attracted to in a presenting team.


  1. Be Factual, Concise, & Clear

Every smart investor conducts extensive background checks and due diligence. Don’t overstate. Make sure your information is accurate. Remember, facts are not elastic. Do Not Stretch Them. Also, remember your assumptions are worth very little, without data to back them up. So be very clear, conscience and careful about explaining your assumptions and backing them up. As Marquis De Vauvenargues said, “Clarity is the counterbalance of profound thoughts.”

  1. Avoid These Amateurish Mistakes

These are the comments we do NOT want to hear in a presentation. No explanation is necessary!!!

• These are very conservative numbers
• There are no competitors
• The market is a trillion dollars, and we are going to capture 1% of it
• I do not like partners
• My idea is worth billions
• The company will sell for $500 million in three years

  1. Be clear about the opportunity and business model

We all have short attention spans. We are not going to waste time trying to figure out the details of your opportunity. If I have to ask you about your monetization mechanism, term, or business model, you have lost me. So remember what Gotthold Ephraim Lessing said, “For me, the greatest beauty always lies in the greatest clarity.”

  1. Do NOT have ANY mistakes in your presentation

I recently received an e-mail from a young entrepreneur, who spelled my company name wrong among other things. He was also 15 minutes late to the meeting. Not a strong first impression. Attention to detail is expected.

  1. Leave Them Wanting More

You do not have to completely open the kimono during the first meeting. Take it one step at a time. If you are doing well, make sure you leave something for the next meeting.

Giving effective presentations is not easy, requires practice, and takes a lot of preparation. But it is an important business tool. After all, we are always presenting in one way or another. As George Oppen said, “Clarity, clarity, surely clarity is the most beautiful thing in the world, A limited, limiting clarity I have not and never did have any motive of poetry But to achieve clarity.”