2. topics
● Communicating innovation
● VC basics
● The VC pitch: a user’s guide
- What VCs are looking for
- Presentation structure
- A few helpful tips
● Q&A
2
4. pitching to a VC is especially hard
● 1 in 100
● Fear of rejection
● Communicating a new idea
4
5. VCs are inherently skeptical (it’s our job!)
● Lots of investments
● Lots of failures
● Looking for big successes – but very few materialize
5
6. VCs are investing someone else’s money
● They need ammunition
● You need to give it to them
● Love is (usually) not enough
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7. why the VC model is so hard
● A $200M fund
● Target: $600M (3x the amount invested)
● 20 investments at $10M each
● Assume 10 investments will fail
● So 10 investments need to generate $600M
● An average of $60M per investment
● But VCs only own about 20% at exit
● Requires an average company valuation of $300M
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8. so what are the VCs looking for?
● Team
● Large market opportunity
● Technology Amazingly, this is a
● Strong competitive position great structure for a
● Execution ability presentation!
● Potential to be a public company
● Deal terms that make sense
8
9. but first…
● Prepare a short, clear elevator pitch that you believe in
● Put it on your first slide
● Three steps:
- Tell them what you are going to tell them
- Tell them
- Tell them what you told them
9
10. team
● Can this team take the company to the next level?
● Does the company have the ability to attract great people?
● Does the company know what capabilities it’s missing?
10
11. large market opportunity
● What pain does the company solve?
● How do we know the pain is real?
● Who is going to pay for this and how much? (ROI)
● How big is this opportunity?
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12. avoid “Chinese marketing”
● There are 1,321,851,888 people in China
● If I can sell a balloon dog at $1 to just 0.5% of them…
● …I will have revenues of $6.7 million dollars in year one!
● Focus on specific attainable market segments where you
offer high value
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13. pick up the phone!
● The more market validation, the better
● Many people like talking to start-ups
● Leverage your network (linkedin,
facebook, eurekamp, etc.)
● Don’t be too secretive
● The VC is going to check the market
anyway, so you might as well get
started
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14. technology
● “Technology” doesn’t necessarily
mean algorithms and chips – it
can be user experience or a way
of doing business
● It’s not about patents
● It’s about:
- Uniqueness
- Barriers to entry
- Tangible technology assets
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15. the “complexity” chart
● Allows a technology discussion to take place
● Demonstrates you have thought about the technology
● Allows you to show:
- What you have built and what you plan to build
- Where you are unique
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16. strong competitive position
● If you have “no competitors” you are in a bad market
- (or you don’t know your market well enough)
● Why do you have a good chance being a winner in the race?
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18. execution ability
● What is the plan? Is it reasonable?
● Do you know what to do after you get the money?
● Are you raising the right amount of money?
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19. financial modeling:
what’s wrong with this picture?
90,000
80,000
Revenue
70,000
Total expenses
60,000
Net Income
50,000
Cash position
40,000
30,000
20,000
10,000
0
-10,000
Year 1 Year 2 Year 3 Year 4 Year 5
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 0 300 4,000 20,000 80,000
COGs 0 200 1,000 3,000 10,000
Gross Profit 0 100 3,000 17,000 70,000
Gross margin 33% 75% 85% 88%
R&D 600 1,200 1,500 1,500 1,500
Sales and marketing 100 1,000 2,000 3,000 4,000
General and administrative 200 500 1,000 1,300 1,500
Total expenses 900 2,700 4,500 5,800 7,000
Net Income -900 -2,600 -1,500 11,200 63,000
Cash position -900 -3,500 -5,000 6,200 69,200
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20. communicating milestones:
perhaps the most important slide
M1 M2 M3 M4
Month 3 9 15 24
Cash required $300K $900K $2.2M $3.5M
Headcount 4 8 11 15
Working FPGA Beta
Technology proof
Milestone Image identification
prototype Tape-out
of concept. within 20000 sample
Image identification size with 2% error
within 5000 sample
Open US office
size with 5% error
3 design partners 1 design win
Complete R&D plan 1 design partner
Market validation
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21. potential to be a public company
● Can this be a stand-alone company?
- Is this a “feature” or a company?
● What are the growth opportunities?
● Are there any similar stories?
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22. deal terms that make sense
● this is a long-term partnership
● alignment of interests
● VCs have limited flexibility because of the VC model
● “Valuation” is really just a function of
- How much money the start-up really needs
- How many investors are sitting around the table
- VC expectations of between 15% and 30% depending on the stage
- Competition on the deal
● Almost all VC terms are standard
22
23. tips for your meetings with VCs
● Decide on your goals for the meeting
- Introduction / testing the waters
- Brain storming
- Financing
● Be yourself and be comfortable with your story
● Expect tough questions (its part of the process)
● Be clear about what you know and what you don’t know
● Listen to what the VC is asking
23
24. this is a two-way street:
you are choosing a partner
● Do your homework on the VC
● Does the VC understand your business and your market?
● Do you have chemistry with the VC?
● Can the VC bring you value beyond just financing?
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25. dealing with “no”
● Unfortunately, hearing “no” is often part of the process
● Genesis has said “no” to several companies that are now in
our portfolio!
● Do your best to get solid feedback
● If you are consistently getting “no’s” try to understand why
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26. momentum
● One of the secrets to generating VC interest is momentum
● False momentum vs. real momentum
- FALSE: “You better move quickly because I am talking to 3 other
VCs…”
- REAL: “Just wanted to update you that I have added Yoav as VP R&D
and spoken with two more potential customers in New York…”
● Momentum can come in many ways:
- Users, technology, team, customers, market validation
● It creates the feeling (and the reality) that this is going to
happen and the VC better get on board
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27. final words
● We know this isn’t easy
● We are here to help, brainstorm, advise, consult
● Don’t take “no” for an answer
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