How to impress VC investors

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Q. Two years ago, I launched a tech business that provides a specialised service. It has expanded quickly and I am now looking to secure substantial investment to accelerate growth. I believe venture capital is the right route for me, but as I haven’t pitched to serious investors before, I am not sure how to approach and persuade them to back me. What do they look for in a pitch and what’s the secret to winning them over? Any advice would be greatly appreciated.
Robert, Leeds

A. The obvious reason for a fast-growing business to seek VC investment is a financial injection, but potentially it could bring you much more. Venture capitalists can be invaluable in building strong management teams, steering rapid growth and helping to establish strategic partnerships.

There are many tech start-ups seeking funding but, equally, stand-out tech companies with significant revenue potential are very high up on the list for VCs. Taking time to really research the market will pay dividends in the long term. VCs tend to specialise in a sector or niche areas within a sphere. It makes sense to identify someone who already invests in companies similar to yours. Once you know who you want to approach, find out which other companies they have funded previously. The British Venture Capital Association (BVCA) will be a good starting point in finding the right option for you.

Once you get in front of the VC, your pitch should be a snapshot of your company. Information such as market size, growth potential and scalability, competition, strengths and weaknesses, key metrics, and the historical and future timeline of the business are all-important – so, too, are cashflow projections. Explain who you will be working with – this will illustrate how the business can be driven forward.

Ask yourself the following: What problem are you trying to solve? Who is your target market, and how big is it? Finally, what’s unique about your service compared with what’s already out there? These are pertinent questions that investors will pose at the pitch.

Prepare an attractive presentation – be concise and direct about your proposition. Don’t overuse PowerPoint, but make sure it helps you to give a clear picture of the important figures. Investors will be looking to the person behind the company as much as to the business itself. Venture capitalists will usually want to be involved or five to seven years, so the relationship is crucial. Be honest and modest about your prospects. Don’t say you’re going to be the next Facebook, if you aren’t. Compare yourself to any competitors and show how you might be more efficient and profitable.

Finally, remember that if your pitch is successful, you’ll be expected to be ready to negotiate how much equity to give up in return for investment. Ask yourself beforehand how much you’re willing to offer and settle on the amount of cash you need. You won’t get long to persuade investors, so it’s vital you’re clear, concise and detailed. Good luck in your search for investment.

About author

Brendan Walsh

Brendan Walsh

Brendan Walsh is Executive Vice President of American Express Global Corporate Payments, Europe, and Chair of American Express's European Governance Board.

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