Over the past few months I have heard at least a 100+ pitches by entrepreneurs looking for VC funding. Almost all of them had one thing in common. Most spend too much time/effort explaining their USP (Unique Selling Proposition) – whether they truly have a USP or not – and miss out on all the other aspects of the business that a VC is interested in learning about. I personally think this USP funda is overrated. I wanted to share my perspective on a good seed/early stage VC pitch. I know these are the basics but I spent some time browsing the web seeing if I could point to another blog and add to it but couldn’t easily find one that covers all the aspects I want to cover (particularly as it relates to Indian startups) and so here I go. At a high level, I look for the following:
- Team: Experience, relevance to the space, complementary skills, relevant advisors
- Product: Customer pain point, your unique solution, sustainable differentiation, USP
- Market/Business Model Dynamics: TAM, growth rate, competition, your business model, go-to-market strategy
- Customer Feedback/Traction: Qualitative and/or quantitative
- Financials: Pro forma financials, how much you are raising, use of funds
In this post, I will address the first one in detail in this post.
Team: This is by far the most important thing. As a seed/early stage VC, I’m entering into a long-term relationship with the entrepreneur and so it is very important that I get confidence around the following:
- Experience/relevance: Does the entrepreneur have relevant experience in the space in which he is starting the company? It could be relevant education or work experience or a combination of both.
- Complementary skills: A good founding team has about 2-3 people with complementary skills. Be it technical, marketing, sales, business development or financial – a good team has a mix of these skill sets. You don’t need all these, but at least having one technical and one business person to begin would be ideal. Even if you don’t have the right co-founders, if you can identify these gaps in the team and make a skeleton profile in the pitch and say this is the kind of person we are looking to add to the team that will work (and you can ask the VC to help identify this person as well).
- Quality: Don’t compromise on quality while finding your co-founders. The founders are the ones that make or break the company and so you need to be extremely selective here both in terms of relevance to your company as well as fit with the rest of the team. It’s better in my perspective if you only have two outstanding folks in a team who work well together (and maybe both technical) and missing a third founder (say business person) than to have a mediocre third founder. You can always find/hire this third person.
- Relevant Advisors: “Relevant” is the key word here. If you are a medical technology or clean technology company that has a Scientific Advisory Board of technical experts in the space that is quite relevant. But, if you are an Internet startup and have five advisors of varying background, I would really question the relevance. I would rather back a strong team with no advisors than an ok team with a whole bunch of outstanding advisors. At the end of the day, it is the team we are backing and not the advisors.
- Young entrepreneurs: One other question I often get is “Do you back young/first-time entrepreneurs?” The answer is an emphatic yes. Many of our portfolio companies are first time entrepreneurs who are a few years out of undergrad. They normally tend to be deeply technical. The key for these teams is to find complementary skills as discussed above – might not need them right away but a good founding entrepreneur realizes the gaps in the team and actively seeks to fill these gaps.
Let me stop now. Would love to hear your thoughts/perspectives on the above.