You would have thought I had an advantage going into the fundraising pitch process. I was a venture capitalist early in my career and was involved in the investment process of 24 completed business-funding transactions. I have actively coached and mentored numerous entrepreneurs in strategy, business planning and corporate structure. My most recent entrepreneurial endeavor resulted in raising more than $5.5 million with a modest business plan at an extremely high valuation (we approached one VC firm and the deal was signed in a matter of weeks).
My current business, NuVascular Technologies has a novel patented nanotechnology platform that is disruptive to our industry. Our first product’s addressable market is more than $1 billion. We assembled stellar scientific and business advisory boards and covered our backside with solid patent protection. We completed preclinical studies with amazing results and received a letter from the market leader that we were an acquisition target. We structured an extremely capital-efficient company with a modest first round funding requirement – but with ample opportunity to add investments at staged intervals to fuel exponential growth.
We tried to structure a perfect VC deal but knew we were in that “in-between” place where the money we needed was too much for angels and not enough for most VCs who invest in our space. We decided to prepare two business plans: one tailored to angels and another to VCs with the main differential being that the angel raise was one-third the size of the VC raise amount, which equaled the first drawdown built into the VC raise.
We took a painstaking approach researching viable VC targets, vetting those who invested in our space, stage and investment amount. Our approach was multi-pronged:
- Contact them directly
- Present at or participate in functions where they were attending or speaking
- Network to get a personal introduction
- Deploy an aggressive public relations campaign to bring attention to our company
The response rate has been about 10 percent, even with personal introductions. This response rate includes any response, not necessarily an indication of interest.
Stay Calm, Focused and Diligent
Don’t get too frustrated or feel as though VCs or angels you reach out to are unprofessional or don’t like your deal because they don’t get back to you. Most often, they have not gotten to your materials in the first place as they are inundated by dozens of other hungry entrepreneurs seeking the same attention you are. Or, they got it but it’s low on their priority list. They have their own fire storms to deal with.
And a good portion of angels are still working full-time and investing is a part-time activity. I recommend staying diligent. By definition an entrepreneur has tenacity, so remain politely persistent until you get to a “yes” or a “no.” Don’t count on email alone. When in doubt, pick up a phone and call because most firms will tell you if their funds are fully committed or still being invested, their review process and timeline, and if they will contact you if interested or if you should keep checking in.
Finding angels is not very difficult as there are ample lists available through basic internet searches. Their websites often describe their application process. Digging into who invested in companies in similar markets is a great way to find both VCs and angel investors. A company’s initial press releases, going back to when it was founded, often provide the names of the original investors and board members. You can then check other companies they invested in and see if anyone involved is in your circle of contacts to create a personal introduction. If you dig deep enough, you might find someone who belongs to the same church or whose kids are in the same soccer league as you or someone you know.
Beware of the Blackouts
If at all possible, try to time your fund-raising activities to coincide with that of the investing community and start your pitch process during the period from mid-January through April and then again after Labor Day until mid-October. As entrepreneurs we think since we are working seven days a week and holidays that everyone else should at least be working regular business hours. Yes, the investment community does work hard but there are blackout periods that makes it difficult, if not impossible, to raise funds.
As a general rule of thumb, it is very difficult to raise venture capital from mid-July to Labor Day, and then again between Thanksgiving and mid-January. These blackouts are about the same for VCs as for angels. If you haven’t had your first partners’ meeting (VC) or screening committee meeting (angel group) well before these dates, there is a good chance you will lose all the momentum you built up getting there. Trying to get your VC or angel champion to get re-motivated and then for them to re-motivate their respective groups again is daunting. During the blackout period, deals are piling up that are just as interesting as yours but fresh to the investors.
Here is an example of what can happen: I presented to a premier life science angel group’s 30-member screening committee. I was under the impression that if we passed muster we would present to the general group in a few weeks and hopefully generate enough interest to enter their due diligence process. We got great feedback from the screening committee and were told they would be happy to have us present to their full group in the fall after their summer break only 3½ months away. Why? Because they “squeezed us in” before they went on summer break. Ouch!
Standing Out on the Pitch Circuit
When preparing to pitch our company, we took a long hard look at where all our key business indicators were and how much “investor risk” we had in the business. We spent years as an R&D house developing a novel nanotechnology and were transitioning to commercializing the technology, which represented a major shift in corporate culture. We proceeded to put together our due diligence binder and went through each section to determine our soft spots. The idea was not so much to receive a better valuation, but to make us more appealing as an investment bet. There is an awful lot of clutter and white noise in the pitch circuit, and you need to rise above it.
Once we determined our week spots, we set out to take corrective action. For example, we are a medical device company and need FDA approval to market our products. So we initiated the process with the FDA about six months earlier than we would have if we had experience and a track record with them. This provided a running dialogue and a method to clarify what we lacked moving forward with regulatory approval. In this example, we focused on installing a Quality Management System to receive ISO (International Organization for Standardization) certification. This is no easy task and not necessary to raise funds, but we made the strategic decision to do so. Through these discussions, we also determined that we did not need as large of a clinical trial. This reduced our total raise amount by almost a third.
This six-month process provided key data for our investors’ pitch and resulted in a more mature and prepared company. The lesson here is that it’s beneficial to put in the hard prep work prior to your core fundraising efforts – you don’t get a second chance to make a first impression. This is especially true with angel or VC investors. There is a constant flow of new deals for investors to look at and, quite frankly, if you don’t get their attention the first time around it’s rare that there will be a second. The investor community has its own grapevine, and word gets out fast on both good and bad companies.
A few months into our pre-pitch period, we chose a few venues at which to present our company and its story. We picked two that were not necessarily in our investor target market to see how our presentation flowed, conveyed information and gauged audience attention. I have found that even if you are not presenting within their area of investment interest, people will pay attention if the story is compelling. If you lose their interest, you probably will lose the interest of your target audience as well.
We made it a point to get feedback from people in the audience after each session. These sessions usually have a common area where people can mingle between sessions. Make ample use of this time. If you are shy – don’t be. Investors are looking for business leaders with moxie to lead the businesses they are betting on. Most are willing to provide feedback if approached politely. Don’t make the approach an appeal for funds as they will excuse themselves. The input we received using this approach was extremely insightful. Entrepreneurs have a tendency to get into too much technical detail and early on we also fell into this trap. The input we received made that clear.
Taking Ownership of Your Pitch
If you have samples of your product or written material you want to hand out, don’t do this before or during your pitch. You will lose the attention of most in attendance as they will be focused on what you handed out. Keep tight inventory controls in place. We have had medical device prototypes disappear or be mauled while being circulated in groups as small as 10 investors. We now offer a hands-on show-and-tell session after our pitch where we can answer questions about the device and more effectively describe its use. This also provides added opportunity for more in-depth conversation and the building of interest.
When you do get the opportunity to pitch your company, your host or event organizer will provide you with any requirements such as the allotted time, Q&A format, PowerPoint policies and information about when and where handouts can be distributed. Not all venues allow PowerPoint presentations and follow what is affectionately called “Quaker Style.” Quaker Style is more of a testimonial than a presentation. In any case, bring back-ups of things such as laser pointers and handouts and bring electronic back-ups on your laptop or memory stick. Plan for what can go wrong, as it often does.
Manage the rhythm and flow of your pitch and don’t be afraid to shut down questions. When you have five to 10 minutes to pitch, like it is with angel and public presentations, the last thing you want are questions from the audience. One question can eat up a third of your presentation time. Let them know that it is either included in your presentation or that because it’s “such a good question” you will address it at the end. Don’t fall into the trap of taking direction from the most vocal person in the audience, as they don’t typically speak for the group. Remain polite and in control. You have just a few minutes to convince them to want to know more.
When speaking to smaller groups such as some VC or strategic partner meetings it may make sense to take questions. This can be to your advantage as the presentation turns into a discussion. When this happens, answer the question and test the waters by asking if that answered the question. Don’t be concerned if others join in. Keep the group’s pulse and manage the conversation so it does not get into to much detail or off subject. When it starts veering, bring it back on track. Feel free to be somewhat forceful, as most will appreciate you keeping the meeting on track.
Get a sense of the level of interest in the room through body language. It can help guide you in terms of how much time to spend in each area as well as the appropriate level of detail. You may be presenting to a group who knows more about certain aspects of your business than you do – don’t waste their time. We presented recently to a potential strategic partner who controls 80 percent of one of our product’s market. We spent the majority of our presentation on our technical details and omitted business, market and financial data as they knew more about it than we did. This resulted in a lively discussion and the creativity was flowing regarding how our technology could be incorporated into their business model.
The majority of your success when pitching comes down to the preparation you invest beforehand. Not only do you need to practice your pitch over and over while you’re driving, brushing your teeth and walking your dog, but you need to know who will be at your presentation, how knowledgeable they are about your space, what their views are and if they have had successful investments in businesses similar to your company. Spend time with your champion, invest time researching those that will be in attendance and, most importantly, have fun and let your passion shine. This is your time to brag and no one will or can do it better!