Ed Sim, who writes a blog called BeyondVC has an excellent post today "Tips for the first VC meeting". I was at the Microsoft Entrepreneur Day yesterday in Mountain View. Over 100 companies and VCs attended the conference, and there was an excellent VC panel hosted by Ann Winblad of Hummer Winblad. The panel also had tips for how to work with VCs.
Here is a summary of the tips from Ed Sim.
- Have an agenda, but be flexible. Start-ups require entrepreneurs to be agile and adept to respond to quickly changing market needs. If you are too engrossed with following every PowerPoint slide, it makes me wonder how flexible you will be in responding to market conditions.
- Have a well-honed elevator pitch: If you can't explain to me succinctly what your product does, what problem it solves, and how you will make money then I wonder how you will explain it to your customers.
- The Slide Deck: make it short and sweet, 15-20 slides will do.
- Listen and ask questions: try to get feedback about your business and the opportunity. The meeting is not a one-way street.
- The Demo: First, if you have any web-based business, I would hope that you have the wherewithal to have an alpha version running. Be prepared and have a cached version of your service to walk through.
- Next steps: In any meeting, never forget to ask about the next steps. What is the VC firm's process, when will they expect to get back to you, is there any more information that you can provide, etc...
From the VC panel at the Microsoft event;
- The best way to get the first meeting is to get referred by someone the VC knows. Someone like a former entrepreneur, board member, another VC, etc.
- Send a PowerPoint presentation of about 10 slides that describes the problem you solve, who your potential customers are, who your competitors are, the business model, the team, and potential market size.
- Be flexible and responsive, and don't expect the same from the VC. VCs are very busy people and are easily distracted. Be flexible about the meeting agenda. Respond to questions immediately. Do not make them wait until later in the presentation.
- Research what kinds of companies the VC has funded in the past. Connect with any people you know at those companies. Get insight into how the VC works, and get a referral to the VC.
Here are some things to avoid when meeting with VCs
- Don't use the latest buzzwords. This drives VCs crazy. Focus on the problem you solve for customers. Use real scenarios, not hypothetical web2.0 dreams.
- Don't spend lots of time explaining "how" you do it. They don't care about the technical details. Explain what problem you solve for customers.
- Don't avoid the competitor question. If you don't have competitors then you don't have a big market, or the problem you are trying to solve doesn't exist. If the problem does exist than customers have figured out some way to deal with it. Show that you understand how they are dealing with it today.
- Don't be arrogant, and don't bluff answers. If you don't know, don't guess. Tell them you will get back to them.
- Don't diss the competition. Respect the competition and anticipate what their reaction will be to your entry into the market.
- Don't ask for an NDA. Don't think you are the only person to ever have this idea. Don't worry about VCs stealing your idea. They throw away hundreds of good ideas every year because the timing isn't right, the team isn't right, or the business model isn't right.
Understand that VCs can be your most important partner, but it can take a long time to find the right one. Ask lots of questions. Make sure you will be able to work with them in the future when tough decisions need to be made. Understand that VCs only fund about 1% of the companies they meet. You should be equally careful about who you work with.