How to pitch like a VC pitches to a VC

Yesterday I tweeted that I wished founders pitched their companies more like a VC pitches their portfolio company when talking to other VC’s. I got a lot of questions about this and then several requests to expand this into a blog post, so here it is.

First, for those who say “Huh? VCs pitch to other VCs?” Yep. Remember how you are supposed to pick VC’s who you think can add value? Well one of the ways VCs can add value is by bringing their networks of trusted co-investors that might be a good fit for syndication or follow on financings. Sometimes, VCs actually roll their sleeves up and help founders with fundraising, by helping with pitch deck positioning and composition, or participating in pitches (although I don’t recommend this generally, mostly because I think it can undermine the founder/CEO).

At the very least, we are very often providing warm introductions for our portfolio company founders to other VC’s and this involves having to do a level of warming the VCs up about the opportunity, why we liked it and invested, and how its performed. Lets call it a pre-pitch. So how does this VC to VC pitch differ from a traditional founder to VC pitch?

Well, a typical founder pitch will try to make sure they look as sexy as possible to the VC. In a good pitch they will talk about the problem they solve and why this is an important/hard/valuable problem, the size of the opportunity, all the ways they are better/different from the competitors, why they have the right team etc. And, founders are on their best behaviour, so they appear bright and collaborative and have their shit together. On the other side of the table during these pitches, VCs are looking for reasons to love it, reasons why it wont work, and hoping to fall in love with the founders. VCs are also on their best behaviour, trying to look smart and helpful and also like they have their shit together. Like Ive said before, its alot like dating. They are also reticent to say ‘No’ straight up even if their gut says so, because they are worried about making a snap decision without enough information, so often reserve the optionality to do more work and I’ve seen that trail off into many iterations of “sorry for the delayed reply…” or “just wondering if you can answer a few more questions”…or ghosting. Which is lame.

In a typical VC to VC pitch, it goes something like this:

“Ok, so ACME are probably in the top 4 performing companies in our portfolio and the second largest investment in the fund [immediately gives them a sense of how important it is to us and its performance]…we invested in 2014 and initially we liked it when we first saw it because we could see this product solved real problem Y and when we looked at the market, we could see they were approaching it completely uniquely and we could see that the market dynamics would support mad growth for these reasons (insert bunch of good reasons). But, we also liked that it was a platform technology and loved that we could see a really interesting pipeline of products that had the capability for upside returns. We thought he founders were good humans and committed although worried they had the right depth of experience to take it all the way [explains the original investment thesis].

So, how have they performed?

First the good stuff. [genuinely, the good stuff] The key value milestones that we hoped to achieve with the financing were A, B and C. They did a great job of A, but they have had the following issues executing B and so we’ve had some delays and the impact of this will be D, E and F, and they have really not been able to initiate C yet. This is disappointing, because we are now about 9 months behind plan but ultimately, I don’t think it affects their competitive position for X, Y and Z. They’ve now launched it two international markets and so we have good early signs of international traction.

Now, the hairs on it: [genuinely, the shitshow stuff] We did have to change the role of one of the founders 12 months ago, because he just didn’t have the right depth of domain expertise, its been a little awkward, but overall he has done a great job of working with the new COO and we think he is happy in his new role of CTO. I think we got it wrong on the first product, the lead product that our capital originally supported is probably much more limited in its market opportunity that we originally thought– it will be useful for creating a brand and will generate a decent revue stream in the interim, but its not going to be the blockbuster we thought. However, the second product which we have now developed from the platform to a point its ready for market entry we believe will provide the solution the market needs for reason F, G and H which we learned from market feedback on the first product and this this is why we are undertaking a new financing. We are still confident the market opportunity is still X and these guys are still ahead of the pack, so the returns still stack up. The other challenges are that while we have good expertise at Board and management level with marketing, operations and scale up we don’t have enough industry input and that’s one area where I think you guys could help give your focus and background. What keeps me up at night is not whether the technology is superior or that the market strategy is the right one, its whether we have the horsepower to execute and I think that something your involvement would really move the dial on [what value we think they can bring and why its complimentary and not competing]”

The difference between the pitches here is simply honesty without any dressing. VC’s know that when the other VC does their diligence they are going to find out whatever skeletons are in the closet. They also know they only get one opportunity to bring a peer into a company under false pretences (overselling or underrepresenting the challenges) before it torches their reputation. The other difference is that VCs know what the focus and value add is of other VCs so know which ones to approach and why they can be strategically helpful. The recipient VC can then can give a pretty quick response bcause they have a more balanced pitch. It’s remarkably helpful for cutting through the crap, avoiding time wasting and it builds trust.

So, if there are any learnings here for founders it’s to remove the bullshit. If you can articulate the depth of the opportunity and why you will win while simultaneously being are self aware enough to know what your deficiencies are or honest enough to appraise your performance, and be brave enough to be upfront about it so you can proactively seek solutions, then you are miles ahead.

With your startup, with your financing, and to be honest, with life.