Investor Pitches: The Do's And Dont's

Recently, two seasoned women investors shared their experience about why some pitches don't persuade investors to write checks.
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According to a recent report from the Center for Venture Research at the University of New Hampshire, women-owned ventures account for 20 percent of entrepreneurs seeking capital, though only 13 percent of them actually receive funds, lagging behind the overall rate by about 5 percent. One crucial step in seeking capital is the pitch. Recently, two seasoned women investors shared their experience about why some pitches don't persuade investors to write checks.

A recognized spokesperson for the technological entrepreneurship community in Silicon Valley, Heidi Roizen has achieved success both as an entrepreneur and as a venture capitalist. Currently a faculty member of Stanford University, Heidi served as VP for Apple, and as a co-founder and CEO of T/Maker Company, a developer and publisher of personal computer software. Heidi was a managing director of Mobius Venture Capital, which had $2 billion under management. Currently, she serves on the board of TiVo, Prysm, Inc. and Springboard Enterprises.

Here are Heidi's top pet peeves when it comes to pitches:

  • Don't expect to turn a blind date into a marriage proposal in one go-round. Your job when you pitch is to convince investors to start a process by figuring out who you are and whether you can accomplish what you promise. Don't overwhelm them with PowerPoints. State articulately in two or three sentences what problem you can solve, not by recounting your entire resume but by explaining, for example, a relevant experience that led you to start your company.

  • Own your numbers! Don't be content to think of yourself as the big-idea person. You have to understand in detail how much your product costs and how many minutes it takes to make a sale. Delegating your numbers is like trying to get fit by sending someone else to the gym to do your workouts. The blood of your company is the numbers -- be sure it's your blood, too.
  • Don't hire relatives and best friends. Of course, there are times when that works out, as it has at Google or Sun Microsystems, but always look for the best person for your company. If your Uncle Henry is an estates lawyer, he's not the ideal person to sort out patents or even help with a business plan.
  • Don't overpromise in the near term and underpromise in the long term. Investors are mostly worried about costs in the short term; they want to understand how you plan to lay the foundation or construct your business. For the long term, they are hoping for big hits, which they don't expect in the first year or two.
  • Show investors a product that they can touch and feel, or a mock-up, video or audio of your product. Then stay in touch with the investors. Be persistent and polite. But, take the initiative to make something happen if they don't respond after the first go-round.
  • An active member of a growing high-tech corridor in Salt Lake City, Utah, Judy Robinett has 30 years of executive business experience with Fortune 300 companies, and also with startups and turnarounds. From 2000 to 2008, Judy served as CEO of Medical Discoveries, Inc., a publicly traded, developmental biotech venture. Trained as a social worker, Judy now devotes her energy to consulting on strategic plans and financing for newly emerging companies. A managing director of Golden Seeds, she remains an active investor in startup companies, particularly in life sciences or high-tech, often taking board positions to guide the strategy to market.

    Here is Judy's list of dos and don'ts:

    • Treat investors as customers. The product they are buying is you and your company, so they want to know what they will get for their money. Too many entrepreneurs are so in love with their projects that they forget that money has value. If you describe your funding strategy from where you are now to how much you need to reach certain milestones, you appear more credible. With $1 million, maybe you could build infrastructure, hire a team and secure patents, but to get a revenue stream going, you will need more money. Be conservative about what you promise so that you can meet or beat expectations.

  • Show signs that you understand that it takes a team to get to the next level. Be sure you don't just want to be calling all the shots; focus instead on how to be successful. Early-stage investing carries great risk, so investors bet mostly on the character of the entrepreneur. It's up to you to show that you value their money and that you want them to act as mentors and open doors for you.
  • Create a strong customer acquisition model; too many entrepreneurs have blind spots about how they will grow. How much does it cost to acquire a customer? What is the size of your segments, and what are your channels for reaching them? If entrepreneurs say they have no competition, it's safe to assume that there is no market for what they are selling. Ideas are easy; it's execution that counts.
  • Count on glitches along the way. It's never a straight line to success, so investors want to hear assumptions about "what if." These assumptions show the quality of your thinking. Anybody can produce great spreadsheets with hockey-stick numbers; hitting them is the hard part.
  • Understand that good relationships with investors are key. Remember that the path is "know me, like me, trust me." Numbers alone don't make an investment. Funding is a relatively small world, so it's imperative that entrepreneurs be truthful, transparent and congenial in all their dealings. Burning bridges with one investor can cut off multiple sources because of their extensive networks.
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