The Best VC Meetings are Discussions not Sales

Posted on Aug 25, 2009 | 23 comments


nixon kennedyThis is part of my blog series “Pitching a VC.”

I’ve sat through a lot of VC pitches and having been CEO of an enterprise software firm for many years I’ve also sat through many customer meetings with sales teams.

There is one classic mistake that I see across both types of meetings – “the tell & sell”  presentation.  This involves a person who leads a PowerPoint presentation in which the presenter feels more comfortable racing through pre-practiced slides and rattling off charts & bullet points than having a discussion.

The presenter comes out of the meeting proud at having gotten through all 30 slides (and maybe even a demo) with a bunch of smiling faces and nodding heads and no discussion.  After the sales meetings I would ask the exec afterward, “how do you think it went?” and always be surprised when they’d say, “great, I think they really liked it.  They seemed to agree with everything I said.”

In our internal sales training sessions I would always teach our young sales execs that this seemingly good meeting was probably not as good as they thought.  People are much more likely to buy into you as a person and us as a firm when they’ve been involved in a discussion with you about their problems, your solutions, who else has been using your product, etc.  They might even like to challenge some of your assumptions.

The advice I gave to my sales execs is the same advice I would give to you:  smiling, nodding heads are normally not a great sign.  In the best case they might prefer to ask you questions but you didn’t prompt them and they’re being polite (although this is less likely in VC who are not known for being wallflowers!).

The VC might have tried a few times to prompt a discussion and you didn’t take the cue but instead reverted back to slides.  This happens often and I bet most presenters never realize it.  Most worryingly, many times it means that they have decided that they are not interested in your product (or investing in your company) so why bother having a debate / discussion with you.

It is easier for them to finish up 45 minutes, politely shake your hand and say, “we’ll get back to you”  once they’ve had a chance to “noodle on it.”  Ever heard that?  Far better that you noodle with them.  I believe that the best meetings are debates.  The following are some tips for the discussion style VC meeting

UPDATE: My initial post talked more about a debate than a discussion.  David commmented here that the problem with my phrasing it as a debate is that I don’t want to encourage any entrepreneurs to think that they should try to “win” the discussion by proving they are right (as you might do in a debate).  So I’m softening my message to “discussion.”  See note at the end of the post for a funny story on this.

Tips in a discussion led VC Meeting

questions1. Tee up your slides to prompt questions – The best way to avoid racing through your slides in a tell & sell style is to tee up your slides to prompt questions.  We used to do this in our sales slides.  After walking through the “problem statement” slide, the build on the bottom of the slide would always say, “Have you experienced similar issues in your company?”

It was just a way to remind the sales rep to create a dialogue.  If you get nervous in meetings or have a hard time remembering to stop you can simply build the prompt into your slides.

2. Stop often and seek feedback on direction – In addition to asking questions to prompt a debate you should always check for feedback from the VC.  Examples are “would you like me to go into more details about how we calculated the market size?”, “would you like me to tell you more about the team members who aren’t here,” or “would you like me to jump into a product demo now or tell you more about our market first?”  Be careful not to jump into a long-winded discussion on any topic without seeking cues from your audience on whether they’d like to go deeper on the topic or move on.  I think this is one of the single biggest mistakes that presenters make.

3. Be careful about the way you ask questions – I’ve sat through many meetings with groups of people where the presenter would say something like, “Do you know what REST is?” or “You know the company Constant Contact, right?”  Questions like this in a crowd often elicit “yes” answers even when people haven’t heard of the technology or company.  Most people in general don’t want to admit in front of peers that they haven’t heard of something that they think they should know.  If your presentation requires an explanation of RSS vs. ATOM always best to say, “let me quickly state how RSS and ATOM are different.  I know you might be aware of the differences but let me quickly cover it and if you want me to go deeper I’d be happy to.”  If the VC knows the difference TRUST ME they’ll tell you.

4. Don’t be defensive – Don’t view any question by a VC as an affront to you.  I know that they could have worded it more politely and in a less condescended tone, but view the question as an opportunity to have a great discussion.  View the question as engagement!  Remember that a VC doesn’t always care that you have “the right” answer provided that you have a high quality thought process.

parliamentHaving a discussion is a great way to build rapport with the person asking the question.  It’s OK to say things like, “I could see why you might think that Google would go into our market.  It’s a valid concern and we worry about it, too.  Here’s why I think Google won’t initially be a threat to us and how we would respond if they entered our market …”. So the next time you get a zinger from a VC – be thankful.

5. Answering with a question – Another suggestion is the “answer a question with a question” technique.  First, you must actually answer the question that was asked with you before you ask a question back.  It’s really annoying in any meeting when you answer a question directly with a question.  But it’s OK at the end of your statement and it’s a great way to get people talking.

Example:

VC, “Do you really think that customers will pay $5,000 / month for your product when there are free versions of X,Y,Z on the market?

You, “We’re not too worried about the free products because they target a lower-end segment than we’re targeting.  We tested the $5k price point with a handful of customers and they didn’t seem price sensitive … From your experience do you think $5k price point will likely be an issue for us?”

6. Don’t be afraid to say “I don’t know” - I don’t think any VC is looking for the entrepreneur who knows everything.  In a way I think most VC’s want to see that you’re mentally flexible, sufficiently humble and not afraid to admit when you’re wrong or don’t know something.  For many difficult or unknowable questions don’t be afraid to say “I don’t know.”  Some obvious things that are not acceptable for the don’t know answers: “how will you spend the $2 million once you raise it?”, “Who are your competitors” or “Who do you need to hire first after fund raising.”  You’d be surprised how many people don’t answer these questions confidently.

7. Get back  with an answer – There are two great things about saying you don’t know the answer to a difficult question.  The first is that you have a chance to ask, “do you have any views on the topic?” and thus hit the goal of getting the VC talking.  Even more importantly you have the ability to say, “that’s a great question.  I’m not actually sure what the answer is.  I’ll look into it and get back to you.”  It gives you an opportunity to email the VC after the meeting with more information and the potential to continue the dialog.

UPDATE:  We once had a company present to us in a full partner meeting.  The presenting team had a partner champion at GRP that was advocating the deal so we were positively predisposed to seeing the pitch.  It mid 2008 and one of my partners asked what they were going to do about costs given the recession.  The COO of the company said that he had read some economic council’s forecasts and technically we weren’t in a recession.  My partner shot back with data of his own.  A real debate ensued.  It wasn’t pretty.  I kept wondering, “why would this guy want to have a debate over a topic like this that had no relevance to proving whether his business idea was sound?”  In the end we didn’t invest.  A large determinant was this gentleman’s lack of EQ in this situation.

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  • David Smuts

    Hi Mark

    You make a great point here for entreprenuers. I agree with almost everything you say here except for one fundamental point, that is; The Best VC Meetings” are DISCUSSIONS and not “Debates”.

    Imagine how far an entreprenuer is going to get debating with VC? (Ever tried that?) I have…, and the entreprenuer ALWAYS loses the debate. Simply because the power balance is in the hand of the VC. The problem is in these types of encounters we end up engaging in debates about opinions and not facts. Facts (when presented correctly) are not debatable. Opinions are. VCs don’t want to hear opininions of entrepreneurs. They want the facts.

    However Entrepreneurs do want the opinion of VCs as well as VC facts and in this regard they do need to engage the VCs for this information by the process of dialogue. Asking and allowing relevant questions during this process. Stimulating discussion. Providng interest and establishing trust early on.

    THe VC engagement is a courting process, one which centres around an engaging dialogue. When the VC engagement becomes a marriage (they’ve invested in you) then the process conitnues on the evolutionary path of a business partnership with ongoing constructive dialogue and engagement. (in the ideal world!).

    You are absolutely right in what you are saying about entreprenuers (salesmen) pitching in “let me tell you what I think you want to hear” mode, completely ignoring the purpose of the pitch: establish dialogue…, not “tell me what you think I want to hear”.

    All too often Sales people (entreprenuers) are fixated about “close the sale”. Successful sales people (entreprenuers) NEVER “close a sale”. Closing a sale all too often becomes closing a relationship. Sales is about inter-personal relationships and these you never want to “close”.

    Sorry for the rant…, I was a trained Pyschotherapist in the NHS before working in Healthcare Sales, Manager in $110B company and laterly an entreprenuer. The experience I gained in psychotherapy at such an early age has helped me enormously, both in sales and in business. Psychotherapy is all about engagement. It seeks to mutually identify problems and mutually identify solutions for these. And guess what? That’s exactly what sales is.

    In pitching (selling) to a VC the entreprenuer must engage the VC to identify his needs. VCs surface needs are simple enough: big solution for a big problem in a big market led by a capable team. Then there are his underlying needs and this is what the entreprenuer needs to extract from the VC via the process of dialogue. I could go on about what underlying needs are, how pyschotherapy approaches these, techniques used, how you mutually identify these etc.., but that’s another blog…,

    all the best
    David

  • Greg

    It’s funny how hard it is for salespeople, or anyone put in the position of selling something, to just ask questions. Probably the most common mistake made in the sales field, in my experience. I fall into that trap myself in “salesy” discussions.

    Couple of typos:
    Queue -> cue
    In stead -> instead

  • marksuster

    Yes, I sometimes fall back into the trap in sales meetings also. Hard not to. Thanks for the typo catches – fixed both. Appreciate it.

  • marksuster

    David, you’re spot on. It is a discussion more than a debate. I thought debate was a better metaphor but I’ll update it to make it clear that it is actually softer than a debate. Thanks.

  • http://lmframework.com/blog/about David Semeria

    I’ve often found that using a whiteboard rather than a presentation is much more interactive and promotes a much richer experience for both sides.

  • http://www.zoscomm.com Jon Ziskind

    Mark -

    Great post. I have found that there are definitely VC’s that want to be pitched to and other that enjoy the debate. Some that really enjoy it. If no questions are asked and you can’t get that discussion fostered, I do believe you are walking away from a shut door.

    I believe I am ready for our next debate.

    Jon

  • http://www.jeffpopoff.com Jeff P

    Great post Mark. “Dialogue” is the word that best seems capture the interaction — where both sides are engaged in creating and expanding the joint pool of meaning. Whiteboards are good in my view because they can create a “build” that the participants can share in — to many powerpoints try to convey way to much info in text without any context.

    I would also point out that entrepreneurs can tend to “rat hole” and over answer questions or let the conversation get way off track and into the weeds. In the end the entrepreneur has to keep charge of dialogue in such a way that the typical 10-16 pitch points get sufficiently addressed in the alloted time.

  • http://www.venturearchetypes.com Nathan Beckord

    Good insightful stuff. One of the best VC pitches I have ever witnessed was when the CEO’s laptop (which contained all sorts of fancy pitch decks and demos) decided to quit working 5 mins before the meeting.

    With no slides to follow and no graphics to explain, it simply became a ‘conversation’ / ‘story-telling session’ led by the CEO…about why he started the company, the pain he saw, what we were doing about it, etc.

    We literally sat around the table and talked about the opportunity for an hour and a half. It was also very effective– leading to a follow-on meeting– and much more intimate than the typical hard sell pitch.

  • Raj

    I had a 3 hr sales meeting today with a big enterprise customer. I kept thinking about this article throughout and tried to remember to ask a lot of questions, and have an open debate/brainstorming session. I think it worked – by the end of the meeting, the customer was trying to persuade me why they’d be the perfect fit for our product ;)

    Thanks for the timely article!

  • marksuster

    David, I agree with you that whiteboards are great. Only caution – 1) some times your audience prefers to stick to a norm (which is PowerPoint) so at a minimum you need it there to revert to if they push for it and 2) in my experience most people suck at whiteboarding. If you’re good – I totally recommend it. Thanks for your comments.

  • marksuster

    Thanks, Jon. I await our next meeting. SB or LA?

  • marksuster

    Great point. VC’s throw curve balls. Especially bad when multiple people from a VC in the room. The job of an entrepreneur is to quickly answer the question, test that the people are satisfied and politely shift back to the entrepreneurs storyline / agenda. Way too many entrepreneurs get sent down the rat hole of a red herring question. Thanks.

  • marksuster

    Awesome. Great opportunity. Maybe more CEO’s should pitch with “broken” laptops ;-) thanks for the story.

  • marksuster

    Thanks for the feedback! Thats great to hear. You’re always in the driving seat when they feel like they’re selling to you. I also notice it when I have a perceived “hot” deal that comes in highly referred or when I interview hot candidates for a job.

  • http://www.zoscomm.com Jon Ziskind

    SB. Next Wednesday.

    Afterward, everyone from the office goes out and races a fun sailboat race together. It’s our ritual. Please come along.

  • Guy Halfhead

    Mark,

    I remember some of those discussions from the early BOL days. From a sales perspective, I think it is more useful to drop the slides altogether and resist getting the laptop out until you are deep into the opportunity. Not sure, however, this would work with a VC pitch

    I have since become an evangelist for the 9 block vision processing model to assist sales actors have meaningful discussions and drill it into all my reps.

    Guy

  • marksuster

    Hey, Guy. Yeah, I think you could more easily get away without slides in a sales meeting than it a VC meeting. Somehow it is part of the VC ritual. I know it’s changing but hasn’t changed fully yet. As always, in both situations I think the best course of action is to have the slides but not start by taking them out. They can become backup in case either the meeting isn’t going well, the other person asks to see them or you need to bring out point slides as a way to guide a single topic.

    What is the “9 block vision processing model?”

  • Guy Halfhead

    http://www.solutionsellingblog.com/home/tag/vision-processing-model

    In this description it is more for diagnosing pain, but i think it works as a good framework for a consultative conversation. I think Tim Barker put me on to it.

  • http://parallax.blogs.com/ Niel Robertson

    Interesting post and I agree whole heartedly. In my last company, an enterprise software company, I constantly tried to train the sales team to engage in a discussion with the prospect before they ever showed slide 1. Its amazing how many questions someone will answer for you if you are asking in a context that shows you're trying to understand their personal situation. If we had an hour meeting and i could get 30 minutes of preamble discussion in it, i always felt it went better. When you get to the slides you have reams of context to put every value prop into, “Joe, you mentioned you are understaffed for activity X? Well that's exactly why we developed this feature, to get you scale with fewer people”. etc..

    This is all “how to win friends and influence people” stuff. Not hard. Its just reorientation around not needing the meeting to be about you.

  • http://parallax.blogs.com/ Niel Robertson

    Interesting post and I agree whole heartedly. In my last company, an enterprise software company, I constantly tried to train the sales team to engage in a discussion with the prospect before they ever showed slide 1. Its amazing how many questions someone will answer for you if you are asking in a context that shows you're trying to understand their personal situation. If we had an hour meeting and i could get 30 minutes of preamble discussion in it, i always felt it went better. When you get to the slides you have reams of context to put every value prop into, “Joe, you mentioned you are understaffed for activity X? Well that's exactly why we developed this feature, to get you scale with fewer people”. etc..

    This is all “how to win friends and influence people” stuff. Not hard. Its just reorientation around not needing the meeting to be about you.

  • http://bothsidesofthetable.com msuster

    Niel, you're spot on. The challenge is learning how to do the opening of the meeting so that it doesn't come across as insincere. Jumping straight into questions when you've requested the meeting can also be annoying for the receiving end. Thanks for your input.

  • http://bothsidesofthetable.com msuster

    Niel, you're spot on. The challenge is learning how to do the opening of the meeting so that it doesn't come across as insincere. Jumping straight into questions when you've requested the meeting can also be annoying for the receiving end. Thanks for your input.

  • http://bothsidesofthetable.com msuster

    Niel, you're spot on. The challenge is learning how to do the opening of the meeting so that it doesn't come across as insincere. Jumping straight into questions when you've requested the meeting can also be annoying for the receiving end. Thanks for your input.

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