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Pitching venture capitalists?
Be sure your story is the one they want to hear.
It wasn’t too long ago that venture capitalists were willing to put big money behind technology companies that were long on vision but short on experience or a detailed business plan.
The well-documented end of IPO fever changed all that; in today’s economy not even the snazziest PowerPoint presentation about the most promising of technologies will readily separate a venture capitalist from his or her money.
Today, securing venture capital is all about substance over style. And that means that private companies must tell the story that investors want to hear – and not the story the companies necessarily want to tell. Even the most innovative technology is only part of a good story. When pitching venture capitalists, tech company executives must concentrate less on the promise of their products and services and more heavily on the business promise.
With the help of public relations and investor relations specialists, companies need to develop and deliver these key messages first:
- “Our finances are sound”
Technology companies (and any company going after venture funding, for that matter) must demonstrate the ability to
execute on their business plan, meet or beat internal projections and turn “cash flow positive.” That’s the point at which the company is able to sustain and fund its own
operations and growth (organically) without having to raise additional capital.
These days, private companies in search of funding must remember that prospective investors focus keenly on a company’s pace
to achieving positive cash flow. Investors are less focused on when a company thinks it will hit $1 billion in sales and instead place a priority on the company’s ability to reach
cash flow break-even before it burns through its funding. Further, the company should show prospective investors that the
capital the company seeks to raise will generate a compelling return.
Strive to convey this information clearly, consistently and convincingly. A company achieves credibility as it meets financial or operational milestones – and a solid public relations and media relations campaign should kick in to spread
the word.
- “Our management team is strong”
Non-financial metrics are just as important as financial ones in demonstrating to venture capitalists that your company is
worthy of their investment. The strength and experience – or lack thereof – of a company’s management team is one of the key elements that prospective investors focus on first.
Be sure to highlight your client company’s depth and
breadth of management experience. Long before a funding pitch is ever scheduled, companies must work to build the credibility of their management team through executive visibility campaigns and strong analyst and media relations efforts.
- "Our market opportunity is large"
Venture capitalists want to know if your company is competing in an attractive industry. Is it growing at 15% or greater per year? Is there more growth ahead -- and how big an upside is there if and when your client beats the competition? Will this investment opportunity yield a 30-50 percent annual return for the VC firm? Do your homework, make the numbers easy to digest, and integrate this information into the pitch that you help create for your potential investors.
- “We really are different”
Investors want to know that a company has a defensible market position. If your company has a truly unique technology (or even better, a patented technology), a valuable process innovation, an employee base with rare skills, an actual
customer base, or a unique brand proposition or position in the market, be sure these messages are a significant part of the pitch. At the same time, be sure the PR programs you put into place consistently communicate these unique attributes to the media, analysts and other influencers. Do all you can to
explain why this isn’t a “me-too” company in a crowded space.
Incorporate these key messages into the pitch at the highest level and you increase the chance that your client’s presentation will stand out. Ignore these messages in today’s economy and the venture capitalists will quickly dismiss your business as a bad bet.
Deborah
Tuerk Crawford (dcrawford@brodeur.com) is vice president and associate director
of investor relations at global technology public relations agency Brodeur
Worldwide.
[PRINTER FRIENDLY VERSION]
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