Raising Finance

Preparing to pitch: Five questions to ask before seeking VC funding

7 min read

08 July 2016

Capital is the lifeblood of a fast-growing business, whether this cash comes from customers, mergers, crowdfunding or venture capital. This puts a lot of pressure on the act of raising finance, so it’s no surprise that pitching for venture capital funding can be particularly stressful for founders.

Image: Shutterstock

What if they ask you a question you cannot answer? And what if they don’t “get” your business?

The good news, however, is that most of the work for a pitch can be done in advance. As the saying (almost) goes, proper planning and preparation prevents poor performance.

So what are the five questions you should ask yourself before you get into the “Dragons’ Den” of a venture capital pitch?

(1) Are you talking to the right people?

It seems like such a simple question – after all, you need funding and venture capital investors want to fund interesting businesses. But it’s actually not that straightforward, and this seemingly easy question means many entrepreneurs are wrong-footed before they even get to the pitch.

The reason is this: different funds operate in different markets, at different stages of a business’ development, with different approaches to investing. So do your research in advance – which funds play in your space and back businesses like yours? This will save you – and your potential investors – a great deal of time in the long run.

Read more on the next page for the other questions you should prepare for.

(2) What are they going to ask you?

This sounds like an obvious one, but by simply thinking about – and then preparing for – potential questions, founders can save themselves from embarrassment. Clearly, the questions you can be asked will vary hugely depending on your particular business, but there are obvious things to prepare to explain.

What is the competitive landscape and how are you different? What happens in a downside case scenario? How do you expect to reach your predicted levels of growth in the timeline you set out?

29-hour pitching frenzy results in Guinness World Record for Virgin Media Business

(3) What are you going to show them?

In recent years we have seen an explosion in the mainstream popularity of entrepreneurship. One clear impact of the Dragons’ Den or The Apprentice (combined with the growing availability of accelerator programmes) is that pitches are now, on the whole, super slick.

We see more professional graphics and layouts – and this has really pushed the bar in terms of our expectations of your presentation. I still enjoy it when founders do a product demo – unsurprisingly, I want to see the product I’m potentially investing in!

I would also urge founders to think about the language in your pitch decks – try and avoid hyperbole by remembering just how many pitches we have sat through in our time! This is also means we’re prone to getting bored easily, so try and get to the point quickly.

I often get asked about how many people to bring along to a pitch. I would certainly urge founders to bring the team along, but only up to four people. In my experience most great businesses have two to four people at the helm, so bring them along and show off you have a great team. You get extra kudos if you’ve worked together in the past and can show you work well together.

There are just two more questions that should be considered in advance of a pitch for venture capital remaining on the next page.

(4) What are you going to do next?

VCs want to see ambition – but we have worked with many an entrepreneur before, and appreciate a healthy dose of reality. So do ask yourself what you are going to do next – but do try and keep it realistic. We want to know about your plans to scale, particularly at Beringea where we back growth business – tell us all about your sales and marketing plans.

Financials play an important role here, but you have been warned: most investors will ignore the hockey stick graph!

So be ambitious – we want to see drive – but let’s not go crazy on the numbers. The same goes for valuations. Much has been written of late about growing valuations – let’s have a realistic two-way conversation about your ambitions, based on where you are and where you want to be.

Image: Shutterstock

The strategy Tyra Banks had to become a leading supermodel can be used in business

(5) Why do you want this person on your board?

The relationship between a venture capital investor and an entrepreneur should hopefully be a long, collaborative and fruitful one – in fact, many entrepreneurs go on to build multiple businesses with the same VCs.

Ultimately, venture capital is a personal business. For this reason, a personal connection will play an important role, so do ask yourself why you want this investor on your board – and then tell them!

By showing you know about the investor’s background and their role in building other businesses, you are far more likely to build a personal relationship of your own, which will both help you attract funding, and have a strong working relationship for the – sometimes tough! – years ahead.

Maria Wagner is investment director at Beringea

Be sure to avoid the method behind these ridiculous pitches, which show how not to get backing from those coveted investors.