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March 11, 2024

Pitch Perfect: A Guide for Young Founders Presenting to VCs

The process of securing investment for a startup can be daunting, especially for young or first-time founders. The newest and youngest member of the HG Ventures team, Erin Crowther offers guiding principles on how entrepreneurs in this position can focus on generating the most value and investor interest in these high pressure situations.

Erin Crowther, Analyst at HG Ventures

Let’s make one thing clear right from the start: I’m no expert. I have only been in the world of venture capital for a short period of time.

But I do know what it’s like to be the youngest person in the room, surrounded by individuals with a variety of impressive startup and industry experience themselves, something that can be intimidating to young or first-time founders.

And while I am certainly not claiming to have all the answers when it comes to pitching a VC (I’m not even sure I have all the questions yet), I can offer advice based on the numerous pitches I have seen.

As a general guiding principle, entrepreneurs should be thinking: “What is the key information I need to communicate, to generate interest and keep the conversation going?”

Given the blizzard of information at hand, this can be a challenging task. And while each fund may have a slightly different investment process, the information presented below can serve as a guideline to those looking to maximize value in that initial conversation:

1. Know Your Audience

Before stepping into the meeting room, take the time to understand the goals and incentives of the VCs to whom you’ll be pitching. Are they corporate venture capitalists (CVCs) like HG Ventures or pure VC funds? Knowing their investment thesis and financial motivations is crucial.

At HG Ventures, for example, we primarily invest in technologies that are aligned with the industries in which The Heritage Group operates, as these are where we are most able to add value. Other CVCs are purely strategic investors, seeking to leverage synergies between the startup and their own business. And most VC funds have a sector focus. Who are you meeting? Tailor your pitch to demonstrate how your startup aligns with their interests–and how it can generate substantial returns.

2. Demonstrate Your Value Proposition

Clearly articulate the value proposition of your product or service in a concise and compelling manner. It is surprising how many technical founders struggle with this, usually because they are just too close to the subject matter. VCs are unlikely to be experts in your industry, so it is essential to communicate in clear terms how your solution addresses a pressing need and offers significant market potential.

A key reason why many startups fail is because of a lack of product-market fit. So while your product many have substantial product-feature advantages, it is critical to communicate the economic incentives that differentiate your offering. Is your product at cost-parity? Are you helping realize cost efficiencies elsewhere? Are you solving a supply chain problem? This allows investors to understand what’s driving your customers’ purchasing decisions. As a general rule, most VCs, whether pure VC or CVC, are financially driven, so unless you can demonstrate that there is a willing-to-pay market for your product it will be a lot harder to secure any kind of investment.

3. Highlight Traction

Actions speak louder than words. Provide tangible evidence of your startup’s traction and success to date. Whether it’s paid pilots, customer acquisitions, revenue growth, or strategic partnerships, concrete metrics validate your business’s potential and instill confidence in investors. What better way to demonstrate initial product-market fit than showing that people are willing to pay or partner with you?

Describing traction sets the stage for go-to-market and sales pipeline discussions. The early years of a startup’s life are filled with estimates, and traction is the foundation to helping us believe those multimillion-dollar revenue projections you are forecasting.

4. Emphasize Team Capabilities

As you set out to solve a problem and address an industry need, chances are there will be other people trying to do the same. Venture capitalists will be looking at the competitive landscape and placing their bet on who they believe will emerge as the market leader. Due to the variable nature of a startups’ early life, a large part of that bet relates to the team.

For a young or first-time founder, this can be more difficult given that you are ‘new to the game.’ If you lack previous startup experience, acknowledge it transparently and showcase your ability to surround yourself with the right talent. Be able to talk about what gaps are missing on your team, and how you plan to fill those gaps; this demonstrates a grasp of forward strategy.

5. Be Clear with Your Ask

The purpose of a capital injection is to accelerate development towards commercialization, so be crystal clear about your funding needs and the value-added milestones you aim to achieve with that investment. VCs appreciate entrepreneurs who have a strategic vision for their business’s growth and can articulate a clear roadmap for success. Whatever your funding stage, outline your capital requirements and how they align with your business objectives.

In addition to the financial ask, be clear about what your ask is from an investor expertise and strategic standpoint. The best VCs have much more to provide than capital; it’s important to know what other value they can add, and to ask for it.

6. Keep the Conversation Open

Remember, securing funding is never just about just one pitch meeting; no founder should expect that an investor will be prepared to write a check right away. I keep coming back to that guiding principle, that the goal should be to spark enough interest to keep the conversation going. This is not only important to remember in current investor discussions, but can be a crucial element to future capital raises. While an investor may choose to pass today, maintaining a positive rapport can lead to opportunities down the road.

Progressing through the diligence process, investors will be looking to learn more and more about your business in order to make an informed investment decision. All funds handle their investment processes differently and there is no single ‘right’ way of approaching things. That said, having a well-articulated and validated value proposition goes a long way.