The Best Ways to Approach a VC

vc
funding
startups
startupindia

#1

Do you think you have the greatest startup idea, an awesome team and a first prototype or market traction, for instance through an MVP? Well done! Now it’s time to raise some money to grow and scale your business. However, unfortunately it turns out that you don’t know anyone who is working for a venture capitalist. Bad luck, sure — but it’s not the end of the world or the end of your startup. In this post, we would like to share some strategies on how to approach VCs and how to raise the funding you need for growth.

Go out and meet us

Always keep in mind that VCs are also especially keen on meeting you: We are constantly monitoring trends and startups and are dedicated to catching, funding and building the next unicorn before anyone else does. So, remember: It’s not just about you wanting to get in contact with VCs, it’s also about VCs desiring to find you — if you have the next multi-million-dollar business.

Therefore, VCs like us love startup events and conferences. If you consider those a waste of time and would rather work on your product during the time of the event, you need to change your attitude (or choose a better event — there are bad events, too). Getting out of your office and talking about your business gives you the chance to reflect on your idea and to find inspiration for growth from other creative minds. Besides opening your mind, events give you the chance to recruit great employees and to get in contact with investors. If you stumble upon a VC, do the following: take the chance to describe your business briefly, share a few relevant KPIs (e.g. number of customers, market size, conversion rates), show your website, app or prototype and get his/her contact data. When you follow up, include your pitch deck and a reference to the talk you had at the event or conference.

Obtaining the chance to pitch your business to a VC is certainly easier when you attend a dedicated pitch event. Often, VCs or Business Angels are part of the jury or the audience and the whole event is centered around the process of pitching and discovering new businesses. Here, the pitch is a bit more formal — depending on the event, of course: you will typically get a chance to speak on stage in front of a large audience and might for instance be able to show a few slides. Always be prepared for questions too — from the audience and from the jury! When designing the slides, please put some work into it: if we can see just the information we need directly presented in a nicely designed way, we are certainly more likely to become fans of you and your business. For a detailed look at how to design a good pitch deck. Keep in mind that you might not be willing to give a too detailed look at your KPIs when you are speaking to a larger audience — which is of course different than talking to a VC one-on-one. Oh, and while we’re on the topic of confidentiality…

A few simple words about NDAs

In short, we don’t like them. Please focus your attention on building a great product, on delighting your customers and on convincing VCs that your business is the best business ever rather than on protecting yourself against anyone who is willing to take a necessarily detailed look at your financials. If we want to invest, we want to know everything and we won’t invest if we have the feeling that we would be buying a pig in a poke. Plus, we are professionals and we won’t share your data with your competitors. Ever. Even without an NDA.

Use your existing contacts and find intermediaries

One way to do this is by searching for our personal profiles on LinkedIn or Xing. We might have a shared connection. Get in contact with him/her and ask for an introduction to us. Getting an intro from someone we know and like is always better than a cold email as it emphasizes the effort you put into your investor search and makes you look more trustworthy.

If you don’t tend to use these networks that much, finding an intermediary can become more difficult. Ask your peers or ask at startup events about where to get funding for your idea. Maybe they know someone who knows someone etc. — you see, it’s all about networking.

Another excellent idea is to approach your existing investors, if you already have some. They might be co-investing into other startups together with VCs or may be personally connected to them and might be willing to introduce you.

Your last choice: website forms or e-mails

Cold e-mailing should always be your last choice: networking works. So please go out and network first. If all else fails, you can always come back and contact VCs via a form on their website or through e-mail as a last resort.

The first thing to do after you have decided to approach VCs via cold email is to find VCs that suit to your area of business. For example, we focus on software as a service, marketplace & e-commerce, and digital infrastructure such as marketing technology. We committed ourselves to these investment themes in front of our own investors. If you build drones, for example, you could be the greatest drone startup ever (and we love drones!), but we still won’t be investing in you.

When you have found a VC who matches your field of business, e-mail him/her. The most important thing in that email is: please include your pitch deck. This is what tells us about your business, your market and your team. No business plans that are written like scientific papers, no “Hey, I have a great idea, can I talk to you. Best, X”. Again, for guidelines on how to design a great pitch deck, please see the afore-mentioned blog post of ours. After writing, wait for a reply. You might want to follow up after about two weeks if you haven’t heard back.

So, what should you do?

The first thing to do is to network and make use of your existing connections. Personal introductions are incredibly helpful. They mean that your pitch is coming from a trustworthy source and it shows that you have put effort in your investor search. Additionally, if you go out and talk about your idea, you will get valuable feedback that will help you in developing your business.

Always remember: Just as you are looking for investors, we as VCs are looking for the next big thing — which might be you! We’d love to find you and you’d love to be found.

We wish you tremendous success with your fundraising and hope to hear from you soon!


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#2

Great post. Very informative and helpful. :thumbsup:


#3

Thank you very much for sharing this article that is really informative and helpful.


#4

Good job.

Thanks for sharing.

I would like to see more posts from you on funding. For example - what VC’s look when investing. Like on what points they give more weight e.g. Market size, Business Plan, Team or Founder, Location or any other thing.


#5

The decision was made to avoid laundry list presentations that ppt makes so easy to create. Presentations that lack a narrative might be okay if you are here to present and create the narrative. But when you share your deck for the first time to get a meeting or a call, you are almost killing all your chances.

At DN we were reviewing between 60 and 100 propositions per week. This combined with the fact that a VC fund is constantly looking in details at 5 to 10 companies results in limited time per deck received. In order to help you get to the next stage I have decided to share with you what VC look for in a deck?

Going back to the basics of rhetoric
No need to read Aristotle, but a lot of great thinkers have put some thoughts on how to win the minds through discourse. There are five well known canons of rhetoric and three are relevant in the case of a pitch deck:

  1. Invention: developing and refining the reasons why we should meet

  2. Arrangement: organizing your arguments (the progression), i.e what is the most persuasive and logical order and what should be the narrative

  3. Style: traditionally it refers to figure of speech, in the case of a deck it has more to do with visualization, illustration

What VC want to see in your deck

The first slide should tell the name of the company, the round, how much you are raising and where it is located.

Your second slide should capture attention (Captatio benevolentiae in classical rhetoric) with what is the most impressive about your company: amazing growth, A+ team, a technological break-through or anything else you think is amazing about your start-up. Almost everything happens here, if you manage to attract the benevolence of your reader and get him excited, you are almost certain to get a call or a meeting.

Then the investor wants to understand what pain-point you are solving, or what opportunity you are enabling: are you building a must have or a cool to have?
The next logical slide is the size of the opportunity: how big can it be? The bigger the fund you contact, the larger the market must be (your business must be able to return the fund at scale). Avoid dropping a number you find on the space you operate in. Segment the market, isolate the addressable base and use your own pricing to get to a Total net revenues addressable market.

If the opportunity is big enough, a VC will then want to now why your start-up will be the winner or one of the winners: who do you compete with (for instance using diagrams, matrices, sentences) and explain why you are better. It is also key to explain why your business is defensible and how easily it can scale.
The opportunity is big and you have compelling arguments on why you will win the market, now show us the product: there isn’t one way to do so. Depending on what your company does it can be a video, diagrams showing a process, screen-shots, customer interviews… And if you are still very early stage, give them a sense of your roadmap.

This is one of the most important slide: go-to market strategy / the sequencing. There are different ways to get to the same audience or the same position. It can be selecting an initial niche and expanding from there, implementing an innovative business model (think Zenefits or Rent the runway for instance), using smart channels (for instance Tinder)… Show them that you have cracked the way to capture your market.
Now that they know everything on your market and how you plan to own it, explain how you are going to make money: what is your business model (except if already covered in the sizing or the go-to market strategy slides)

Eventually it is time for numbers, use the KPIs and data that are relevant to your business model and space you operate in (mobile, SaaS, enterprise, marketplace, E-commerce…) and show some curves.
If the team wasn’t your first slide, time to show why the team you have assembled is relevant to achieve the vision you presented. Your reader already has a good understanding of what you’re after and will more easily relate the different backgrounds to the the project.`

“(Your company name) is based in (x). We are raising a (round and amount targeted). (slide 1). We have assembled an amazing team (slide 2), to address this major pain point (slide 3), that x million businesses face, resulting in a 1.4Bn market opportunity (slide 4). We are not alone in this space but we have built the strongest product. We enjoy network effect making our business defensible and we have automated x% of the process, making it scalable. (slide5). Here is the product we have assembled, our customer reviews are excellent and we plan to release this feature to increase stickiness in two months (slide 6). To capture this market we are first targeting this niche as we have strong relationships with several players and believe that we will easily expand to these adjacent segments from their (slide 7). We have chosen a subscription based business model with 3 different plans (slide 8). We already see great traction. Our current MRR is (x) and we are growing (x)% month-to-month. Our blended CAC is (x) and the monthly churn c. (x). Customers payback in (x)months with a CAC LTV ratio of (x)x. (slide 9)`

If you have comments or questions, please share them. I am happy to help or enrich this post with your insights


#6

This is a lot of great information… I have the next million-dollar startup… and it will create millions of jobs across the world… I need advice on how to expose this amazing serial business chain of tech startup innovation? I most share… When I came across a business owner in Miami FL last year … and meet up with her I was offered a job as a social media specialist for her company… I completely caught off guard by her offer. I was later asked what company did I work for an where did I earn my bachelor of science in business administration (BSBA).
I responded by saying I have generated this concept completely on my own. an that I never went to any college to learn anything it is simple a hack …. I found my way into a social media system. The light bulb just turned on in my head that is all…. Somebody talk to me…?


#7

This is quality stuff. Thank you so much for sharing. :slight_smile:


#8

Thank you for the detailed answer.


pinned #9

#11

Good information Thanks


#12

@Aagam Very good information. Thanks for sharing.

I have started a new ecommerce startup and and I need to raise funds. Can you please guide how to raise funding rounds and all the procedure. I would like to read a detailed post on this.


#13

Reach Ventures currently has 100 million USD fund ‘Flight I’ scouting for potential startups in India categorized under following business domains :-

1. Real Estate (Smart Housing and Commercial Buildings)
  - covers builders with highly worth project portfolio, smart
  building material manufacturers, smart and sustainable home
  automation etc.
  2. Food Processing - Synthetic Food manufacturers primarily
  3. Fashion - clothes, shoes, accessories etc brands valued at more
  than 25 crores INR
  4. Commercial Farming - urban and robotic farming primarily
  5. Clean energy - automobile, water harvesting, charging stations
  etc.

Kindly contact to discuss further.


#14

Hi,

I have a idea into an alternative transport option which not only checks on pollution, but also helps urban clad to live healthy. It helps people in many ways to keep them healthy. It is a sophisticated business model which is successful in many countries in the world. but there is nothing in such in India. This model also well fits into Smart City Concept too.

Need help in getting fund, which is a biggest consideration of us. This is the reason we have not started it yet. We have Business Model, Revenue Model ready. We are also running social media campaign to check the market response and we are doing well. Please do help us.


#15

nice article. as per words contacts are more important.


#16

Hi
I would like to share here my startup based on the recruitment firm .I have more than 10 Yrs Experience in this field
Currently can generate business turnover is 4lakhs / Month with present clients
Need investment for Resources and Marketing : 30 Lakhs
After investment turnover will be: 8 lakhs to 10 lakhs / month
Can give good returns to investors start from 4 Months
Can gtalk : recruiter.veena


#17

Very useful information and thanks for posting such a great information.


#18

I met one prominent investor who invested in about 2000+ startups.He said those who approach him for funding,he never respond or check that emails.But he go with some reference either friends or enterprenuers who he funded.try that as an option.

Or you can contact me for more info at : hello■huntertech.in

Gud luck!!


#19

Hello ,

What’s your contact detail like Whats app number or Skype ID ?


#20

Guys make sure you use Visual communication to share your business Idea. As visual communication makes things easy to understand. Have a look to this video


#25

Hey, do you still invest in startups? Your website is down and no info about you found on Google.