Founders, Ask yourself these questions before pitching to a VC
Getting a meeting with VC is difficult. Especially if it was a cold email, the VCs are already risking a lot to talk to you over their other priorities. So make the best of it.
Also, First impressions really matter.
If you haven't thought about some fundamentals of your own business, it's a big red flag. Not only will this burn the chances of an investment, but it might also potentially lead to bad feedback.
So here are a few questions, not in any order, that might help you think through your startup idea before pitching
Basics:
- Clear vision/mission statement: Keep this short → Summarize the company’s business on the back of a business card.
- What is the bulls-eye 🎯of your market entry strategy? Who is the perfect target customer? Describe and define them.
- Who are you going after? rabbits, mules, elephants, whales and how will you get them? Read this post for more clarity.
4. How to get the first 10s, 100s, thousands, many thousands, tens of thousands of them, even millions?
5. What is your business model. What business(es) are you in, exactly, and how will you make money doing it? Have you used the business model canvas? That will show you your revenue channels, costs, etc.
6. If your business is new, why has no one built something similar yet? Why will you be different? What are the risks?
7. Is your market already created by an early entrant? Or Do you have to disrupt it? Both of these are risk factors for the VCs only from an execution standpoint.
8. What are the uses of capital you would raise and how much are you raising? ( Give ONE number and justify it.)
9. Your business should ultimately be valued at what annual revenue multiple and why? What are the comparables?
10. What are your long-term sustainable competitive advantages?
11. Why is the time right, and now, for your business?
12. What are you looking for in an investment partner? Why us?
Numbers:
13. How big is your market? TAM, SAM, SOM and your Revenue potential, ideally a $100Mn ARR in 4 -5 years. You should definitely read this article. If this doesn't blow your mind, write to me.
14. What are gross margins at scale? How does it compare to the peers and market leaders?
There are a few articles/reports that I really like and have seen other investors use as benchmarks
Bessemer Venture Partnershttps://www.bvp.com/atlas/scaling-to-100-million
15. What will be your Rev growth, gross margins, and EBITDA (profit) margins at scale?
Early Revenue companies:
16. For later stages, post-product-market fit, post rev phase: Bottom-up calculation of revenues, costs, expenses, headcount, margins, EBITDA loss or gain for 3–5 years.
17. What is the average selling price and can you justify those prices comparatively? How price sensitive are your customers?
18. Who or what is your salesforce that will achieve the Rev targets?
19. Who are your force multiplier dream partnerships? Have you achieved any such partnerships?
20. Why or is your tech or approach compelling, unique and differentiated?
21. Any patents or trade secrets in your tech, data, or insights?
22. What is your current cash balance? What is your monthly burn (last year, this year, next year)? When are you raising? How much cash are you raising?
23. If you build a great business who should be interested in acquiring it and why? Or could it be a standalone public company?
Founders and People:
24. What role(s) do each of the co-founders play?
25. How much time do you and each have committed to this venture?
26. Any major competing interests for you/them on time or interests?
27. Are there signed founder agreements?
28. Do you have a structured CAP table and ESOP allocation?
29. What are your key hires, if there are any?
There are so many other resources that give you an insight into a pitch meeting. I'll update this space with those links or maybe create an Airtable (if I feel productive enough).
