Q: How can I make my Zoom pitch stand out to investors?
The best virtual pitches we have seen are ones that have reinvented the process. Investor’s days are stacked with back-to-back Zoom meetings, so if you want to stand out and be remembered, think outside the box. While it might feel more comfortable to focus on every detail of your pitch deck, to investors, it can feel transactional. Instead, be present in the conversation and aim to connect with the investors on a personal level.
A great way to break the ice is to dedicate the first 10 minutes to tell your story and then naturally segue the conversation into presenting the important information. I coach entrepreneurs to think of slides as the supporting party to your pitch. Don’t fall into the trap of simply clicking from slide to slide; this doesn’t let us get to know you, nor does it leave a strong impression.
However, it is still very important to build a thorough deck, but just make sure you are not hiding behind it when you are presenting. Instead, drive the conversation and, for example, if an investor asks about market size, pull up that slide and discuss in detail. This shows you did your homework, but creates a much more interesting and memorable experience for all.
Additionally, Zoom is a great format for hosting virtual demos, and we believe it provides a much more seamless process than when in-person. We recommend hosting the demo within the first 30 minutes, and if executed well, it can leave a lasting impression.
Takeaway: Whether virtual or not, investors are trying to build a connection with you, so make your time feel less like you are rushing through a slide deck and more like a conversation. And as always, be confident, compelling, concise, and leave plenty of room for questions.
Q: How do I get investors excited about my vision?
Meeting new entrepreneurs who are building amazing companies is the reason we are in this business. If you are meeting with an investor, it is likely they are already very interested in what you are doing. However, there is still a lot of work to be done to continue capturing their attention.
At Emergence, in order for us to get excited about a company, we need to first understand the big, long-term vision. In our experience, the best way to bring this to life is through compelling storytelling. If you wait too long to sell the vision, it is easy to lose control of your narrative.
However, once you have the investor’s attention, then it is time to share your operational plan. This is an important step in the process because it shows us that you are realistic and practical about your product and go-to-market approach.
Takeaway: Proactively paint the big picture from the start and convince us why your business can be worth multiple billions in 10 years.
Q: How should I approach relationships with investors, even when I am not fundraising?
As a founder, you should always be fundraising—or at least preparing for your next raise in the background.
First, identify the investors you feel are best suited to participate in your next round and find ways to build relationships with them. In doing so, you already have a head start when it is time to fundraise again; and because you both already know and, hopefully, trust each other, they will be able to make decisions quickly.
Second, keep an updated pitch deck on hand to share with investors as part of these early conversations, as it is likely they will ask. The best “teaser decks” we receive are usually two to five slides that paint the big picture and present the mission of the business.
Your slides should:
- Frame the market opportunity
- Showcase the team (especially team members with strong backgrounds and domain expertise)
- Demonstrate traction with a high-level chart that shows revenue growth
- Highlight a thoughtful sample of customers (but do not give out the full customer list yet)
Third, it is important to emphasize that bringing an investor onto your board is a decision not to be taken lightly. In doing so, you are entering into an agreement that will play a critical role in your business for many years. Never make a decision on an investor in haste; it’s simply too important and there are too many factors to weigh. This is another reason why nurturing these relationships and learning who you trust ahead of time is so important.
If this is not possible, make sure to do your homework and do your own reverse diligence on the fund, and, most importantly, the person you’ll be working with.
Takeaway: Regardless if you are actively fundraising or not, identify your top investors and find ways to build relationships with them. Always make sure you have a deck prepared to share with them. Your goal should be to establish trust and figure out if they can be the right long-term partner for you and your business.
Q: What is the best approach when investors ask to speak with your customers?
Most investors will ask to speak with your customers. As a founder, it could feel like that ask is not only a time-consuming favor, but it could shake their confidence in your company. The advice I give to founders is to prepare customers in advance and find a reasonable balance between the parties.
It is important to build trust by approaching the topic with your target customers early in the fundraising process. Start by having a conversation dedicated to sharing that you are starting to fundraise and explain the reasons they would make a strong investor reference. Be intentional and frame how the fundraising will help the business, improve the product, and hire the best talent. It is important to get them excited about the future possibilities and how it will also benefit them.
If there are still hesitations or push back, an alternative we recommend is to speak with them yourself and record the interview. (With their permission, of course.) This way, you can share a password-protected file with your investors, consolidate their questions, and then package them back for the customer to answer.
It will be especially important the investor can feel their sincerity when listening to the recording. Make sure the customer comes across as real and raw, so coach them to not use marketing jargon or industry acronyms.
Lastly, we always emphasize the importance of setting criteria for who can speak with your customers. We typically recommend you reserve it only for the investors already heavily invested in the process and have completed a fair amount of due diligence.
Takeaway: Identify the most appropriate customers and prepare them to be your investor references ahead of time. Set them up for success by showing them how the fundraise will make a positive impact on their business as well.
Q: What are the milestones investors look for at Series A and Series B?
At Emergence, we look at revenue, but we actually care much more about growth momentum. As a general rule of thumb, most investors generally want to see 2-3X growth in the last 12 months from a revenue standpoint.
Our firm also weighs heavily on customer love, which can be assessed in many ways. We like to see a high Net Promoter Score (NPS) and growing net dollar retention. If your NPS is not where you would ideally like it to be, can you find other ways to showcase how customers feel positively about your product? Example: If your company has a better score than a competitor, make sure to highlight it front and center.
Emergence also really values customer reviews. Typically, during diligence, several people on our team talk to a company’s customers. The most important data we look for during these customer references is 1) return on investment (ROI) data, and 2) unit economics: how expensive is it to sell the product? How long does it take to recoup that cost? Does this vary by segment?
We also make sure to assess customer reviews on G2, one of our investment companies, because it provides real reviews from active users.
Takeaway: Growth momentum is important, but you should also showcase high NPS and positive customer reviews. For customer reference calls or case studies, we want to see ROI and unit economic data.
Q: Some investors have very large investment portfolios. How can I make sure that there are no conflicts of interest?
Most investors will self-select themselves out of deals with conflicts, but not all. It goes without saying that as a founder raising money, you should already be well-versed in a potential investor’s portfolio. Do your research on their website, as well as press releases and data from Crunchbase or Pitchbook. It is your responsibility to know this.
While there are typically some direct competitors, what is more challenging for you (and the investor) is assessing which portfolio companies could become competitive over time. That is something you can only know by asking the investor. How they respond may be revealing about what they could be like to work with. Are they honest and frank or dismissive and defensive? Also, what percentage of your company will this investor have? If it’s a small percentage and they won’t have information rights, the risk can be mitigated. If they are going to be on your board, the risk is much greater. Fortunately, the vast majority of VCs are very ethical and will do the right thing.
Takeaway: Do your homework; there are plenty of tools available to help you.
Q: What are some common reasons investors turn down startups?
A common reason many investors might pass on a startup is because they believe that the market is just too small or is not growing fast enough to meet their criteria. As investors, we need to believe that your business can grow to be worth billions of dollars; it is important for us to see that you are in a market big enough to support a business of that scale.
Timing is also critical. Oftentimes a market may start out small but grow quickly; other times, they grow, but more slowly than expected. While a business concept or technology may be exciting, if the market doesn’t mature in time, the company won’t succeed.
Another important piece of advice for founders is that most investors rely heavily on back-channel references. To be proactive and put your best pitch forward with strong references, reach out to shared connections ahead of time. Let them know that they might be contacted; provide a baseline for what you are building and the purpose for the reference check.
Takeaway: Market size and maturation are key, but even then none of that matters if you have poor references.
Please follow me on LinkedIn to learn more about Emergence, our upcoming events, and ways to get involved in our community.
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