Going to Raise VC? Here’s a Primer on Process, People & Powerpoint Deck

Posted on Jan 11, 2011 | 73 comments


If you want a very quick primer on all the stuff nobody ever tells you about raising venture capital check out this video where Mark Jeffrey & I break it down on This Week in VC.  A summary of what we discussed is below:

Not 100% in order of the video, but close.  All of this is covered in more detail on the TWiVC video above (and much of it is covered in text on this blog on the “Raising VC” tab)

1. Will a VC sign an NDA (non-disclosure agreement)? No. If they did they would be in constant violation because VCs often see 3-4+ companies in every market that they operation.  NDAs would make it impossible to do business.   Asking for one to be signed shows naïveté.

2. What is the VC process?

  • Meet with one person from the firm – partner or associate.  If you can meet a partner up front it’s always best but sometimes it’s not possible.  The first meeting will often by with an analyst, associate or principal.  Often principals are allowed to do their own deals whereas associates are not.  Associates are good an important people – I discuss this in the video.  Still, “call high” if you can.
  • Potentially several other qualifying meetings before you get to meet the other partners if the person you have met is not yet convince / wants to do more work.
  • If you make it past this stage you will go to a “full partners meeting” which is exactly what it sounds like.  In the video I describe how to best play this meeting and why, without a champion going into the meeting, you’re unlikely to get an investment.
  • After the partners’ meeting you should usually get a pretty good steer on where you’re at in the process.  If you don’t, make sure you follow up and ask for feedback
  • If they say yes you get a term sheet and once this is signed it is usually 3-6 weeks until your legal docs get signed and you’re funded.

3. Who should attend the meeting?

  • 1 or more can attend first meeting depending on strength of your team.  It can be a good strategy to bring just the CEO because 1-on-1 rapport is easier to build but if you have equally strong co-founders bring them.
  • Critically at the partners meeting you should have 2-3 people.  Most investors are looking for a team rather than backing a single individual.  Whether or not they are co-founders or not – they want to know you can build a team.
  • One big mistake is to bring a team and then not have them speak.  At worst they look like stooges.  Equally likely you show your inability to listen to your team and your over dominance of conversations.  This is a common problem I see – the CEO who talks over his / her people.  Give everybody pages of the deck they’re to cover or parts of the demo for which they are to talk.  When you get questions act like a quarterback farming some of them out to your team.  This isn’t weakness – it’s leadership.

4. What is a VC looking for? Above all – the quality & potential of the team.  They are also looking for a well-defined market opportunity, evidence of your success to date and ultimately most are looking for a large addressable market as this is the only way a VC drives returns.

5. Do you really still need a Powerpoint deck in 2011? Can’t you just demo & talk? You might be able to do this with some investors but not most so at a minimum you need a deck ready to walk through in case you’re asked.  Remember that most people are visual thinkers and Powerpoint slides simply help frame the conversations.  The best ones are visual, high-level, have a narrative, move swiftly, are designed to prompt questions as much as “pitch” your company and importantly have a narrative.

6. What should be in the deck? Some variation of the following (this is a suggested order)

  • Bio of top 3 people in the company.  Short sentences, bullet points, easy to read.
  • Problem definition (with the market … it’s why you exist)
  • How you solve that problem conceptually at the highest level
  • Details on the solution
  • [Demo could go here]
  • Why you believe there is economic value in what you do / how you think you can monetize one day
  • Competition
  • Progress to date of your company (when started, key milestones, what shape is the product in, any pilot / beta customers, financing)
  • Market sizing
  • Potential future exit possibilities
  • How much are you raising, how long will it last, key milestones you plan to hit before the next round

You can vary from this but these are the key themes are the ones you need to cover.  And you should have a narrative, which ties your whole story together.  You should have 10-12 slides and anything else that is detailed should be in your appendix.  I think it’s good to have a 10-20 page appendix that shows the details of the market, your product / roadmap & progress-to-date.

The “exit” slide is controversial but as I discuss in the video – necessary no matter what anybody else tells you.  Here’s the deal: ultimately you’re likely to sell your company, not IPO.  Don’t talk about wanting to sell any time soon.  But you need to talk about who might “some day” be interesting in what you’re building and why.  Ultimately VCs are in the busy of making returns and whether they acknowledge it or not for most investors it will form some part of their decision on whether to invest or not.  And if you don’t plant the seeds they will fill it with their own ideas.  Better that you expand their thinking.  Trust me.

The video covered a lot more including viewer questions on whether a business plan is still necessary, whether VC decisions are “gut level” or rational strictly based on numbers, when should you accept a “no as a no” from the VC vs. showing persistence, etc.  If you need to raise VC money in the next 12 months it’s probably worth the hour to watch it.  Hope you enjoy.

  • http://bothsidesofthetable.com msuster

    No, not an impediment. But a team is always better. At a minimum it shows you can attract talent and lead.

  • http://bothsidesofthetable.com msuster

    It's not a trend, it's a long-standing norm. Even if you're in the legal right – nobody wants to spend legal cycles defending themselves against disgruntled entrepreneurs. Better to avoid it altogether.

  • http://bothsidesofthetable.com msuster

    Ha. What a great idea. If you know any of them send them my way. Every VC I know privately says this is the biggest bubble since dot con.

  • http://bothsidesofthetable.com msuster

    Exactly. I wrote about my experience here: http://www.bothsidesofthetable…/

  • http://bothsidesofthetable.com msuster

    Thanks, Mike. Have you seen this even at early stages? It hasn't been my experience but maybe I never asked enough people to find out. It's a Silicon Valley tacit understanding that VCs don't sign NDA's but maybe it's more myth than reality? Have you found this to be in many geographies? I know you raised money later stage – were they willing to sign NDAs for early-stage stuff? I'd be interested to learn.

  • http://www.kidmercuryblog.com kidmercury

    John doerr, don dodge

  • http://berislav.lopac.net Berislav Lopac

    What I had in mind is not the specific presentation, but how to present the whole concept.

    Here's an imagined example — how would you personally react if it was 1991 and you were a VC being approached by a certain entrepreneur named Tim Berners-Lee with a technology called World Wide Web? Even if you grasped the versatility of the concept, would you ask him for a single specific product (e.g. a shop or a knowledge base), or would you consider funding the further development and productization of the platform? I'm really curious about the answer. :)

  • http://twitter.com/undercovercto undercovercto

    Thanks Mark – great post!! Very helpful to me.

  • http://grossnet.co.uk David Gross

    Hi Mark
    Excellent post – I like this a lot. General public think its all about the idea, but as per your assertion, VCs invest primarily in people – think the tips in point 3 are spot on (particularly the one about only bringing a team if you are going to involve them). Also like the check list in point 6 although I would suggest including a slide on outline marketing strategy as well (after market positioning)
    Regards,
    David
    http://internetbusinessexpert….
    http://twitter.com/webshrewd

  • http://www.facebook.com/established1982 Violet Whitworth

    Reading this article was painful, does no one proof read before publishing anymore?!

  • SumGuy

    So I'm supposed to take typo-riddled, poorly-written advice from a VC who's invested in not a single company I've ever heard of?

  • Jbang

    Great stuff. Thank you.
    You mentioned about the entrepreneurs from cal tech phd and Yale as an example, but what is your thought on entrepreneurs with regular or no higher education at all?

  • http://twitter.com/iconverdge Todd Cohen

    Excellent post Mark, great timing as I'm currently in the process of seeking funding for my startup. I met you about a year ago at the last Twiistup event and we had a chance to talk for a little while.

    I've been following your blog for a while and it's really great to have someone with your experience guiding people.

    I spent a few years developing social networking sites for companies like Mashable, Disney and Sun Microsystems before deciding to focus on developing my new social commerce platform. I decided in 2009, due to the opportunities in the emerging markets such as Brazil, to expand our business into the LATAM market. I raised angel investment from my brazilian business partner and moved down to Brazil in Jan 2010.

    You mentioned that you do most of your investments within California, but you would participate in a B or C round outside of California. Do you find this to be a common approach for most VC's? What's your view on a startup focusing on a more global approach to their business model from the start vs. a more locally focused approach?

    We are very close to closing a few big partnerships, but my concern is that we will not have the necessary funds to properly execute on the opportunity and the process of raising funds could take 3 to 6 months. Do you think it's feasible to sign these big partnerships and go for VC at the same time or should we put most of our focus on raising VC funds and try and put off closing on some of these deals until we know we can fully support them?

    Read more: http://www.businessinsider.com

  • http://twitter.com/iCrowdApps Ted Kao

    I'm in the process of getting our materials together for VC meetings so this has been really helpful. Thank you Mark. Really appreciate the time you spent educating us.

  • Barbara Tallent

    Thank you so much for saying entrepreneurs should lead with their introduction. In my coaching of women entrepreneurs at Astia I always tell them to lead with their background. I always get great resistance on this!

    Wish you had covered what women should wear though.

  • Professor X

    Hopefully you can figure out an equivalent from what was suggested the guy wear. ;) as general guidelines, perhaps something not too formal (equivalent to suit and tie)… nothing too casual (equivalent to tshirt and jeans). I think it could be inferred from what was described, don't you think?

  • http://twitter.com/rohnjaymiller Rohn Jay Miller

    Regarding the “deck” I like the 10/20/30 Rule:

    No more than 10 pages–see outline above. No longer than 20 minutes. The reason it's called a “pitch” is that you should be throwing strikes down the middle of the plate. Nothing smaller than 30 point type. The slide should support what you're saying, not visa versa. My $.02

  • http://twitter.com/todiba Tommaso Di Bartolo

    It´s interesting to read and see the differences in engagements from the VC world in US compared with the german one. The videos and the VC-meeting slides are excellent content. There you percieve that the US-VC investment industry in Tec. is much more ripe than the VC industry in the german speaking countries. Partnering with an engaged VC, means getting more value out of your exit. I suppose, that an entrepreneur with a sexy business investment case is in better hands in the US … Would be interested to exchange experieces on that. What you think?

  • http://twitter.com/andrewlchen Andrew Chen

    Thanks for the great interview. I thought the bio upfront point was pretty insightful, even if unconventional — and probably particularly relevant to 1st time entrepreneurs or those who haven't yet built household names for themselves. I also think the suggestions offered on building mentorship relationships was spot on.

  • http://twitter.com/rodneybowling Rodney Bowling

    Rodney Bowling – I am glad I read this. Gave me some good advice. I am planning on seeing a vc soon. Rodney Bowling

  • http://twitter.com/serge_a_storms John Thompson

    Thanks Mark. Finally had time to watch the video. Making this one required for my co-founder to watch!

  • Cesar Castro

    Very useful information – the hardest part is to make that connection with a VC. I keep hearing that 'you need to find me'. I keep trying (via Twitter, LinkedIn, blogs) but no success so far. Not that I'll give up though!

  • http://twitter.com/DiscoveryCast DiscoveryCast Inc

    Come on Mark! I would pay to read a “No Tie” post!!!

  • http://twitter.com/lollywould Lol Williams

    Awesome video than you Mark and Mark. Just found you via Read Write Web and the 4m's – I'm pitching this week and vid this has backed up some of my thinking so much more confident – I'm also now getting rid of what Ties i do own ( Splashback) I never thought of that ! If you want to start the Anti Tie movement I'm there @Lollywould