Example: don't NOT have a firm plan in place for funding
So you have this totally killer idea for a tech company, like an app that scans your sheets’ thread count to make sure you got what you paid for. Or maybe a news blog that’s devoted entirely to all things Steve Buscemi (not a fan site—a legitimate news service). Or maybe a driverless bike that can sense and steer you around all obstacles and obstructions in the road (except for driverless cars).
So you need money, right? There are right and wrong ways to ask for it. At Vator Splash LA last Thursday, a panel of VCs discussed good and bad pitches, and what stood out to them.
For David Fink of LA incubator Science, it’s startups that don’t have a firm plan in place.
“The number one turnoff we see is startups that want money, but when we ask what they’re going to do with it, they have no idea. They have large, general ideas like building the team, and marketing, but when you ask them to line it all up, they can’t. The ones who can answer that question, it’s a no-brainer. We want to get involved with them.”
Peter Lee of Baroda Ventures added: “Startups say ‘if you fund me, I can quit my job and do this.’ If you were really passionate about your startup, you would already have done that.”
That’s what not to do. So what should you do to win over a VC?
“Be scrappy and get something up and running,” said Peter. “Do your homework before you walk into a VC’s office. You need to build your business, and raising capital is a requirement, but it takes time.”
What if said VC is worried about your startup’s metrics and spews out a bunch of questions about how you’re going to do this and that and everything else?
“There’s nothing more impressive than an entrepreneur coming back one or two weeks or three weeks later with answers, because it shows 1) you took their questions to heart, and 2) you’re trying to solve the problem,” said David Fink.
Matt Mazzeo of Lowercase Capital had this advice: “nailing your pitch and showing why you’re the perfect person to tackle that problem is critical.”
Moderator David Travers of Rustic Canyon had this winning story about how an entrepreneur won him over:
“I had one entrepreneur who was a first-time entrepreneur who hadn’t raised money before, we had a nice first meeting and I gently passed, he came back with thoughtful answers but then magically had three people I knew really well call me up and tell me ‘I know you just met with so-and-so, let me tell you what he does really well.’ He had a great follow-up and got other people to vouch for him.”
The moral of the story: get your startup going and arrange to have friends in high places.