With less venture money flowing and fewer entrepreneurs scoring cash, what does it take to make the cut? Three VC investors — Alex Ferrara in the Larchmont, NY, office of Bessemer Venture Partners; Maneesh Sagar of CT Innovations in Rocky Hill, CT; and Jon Elton in the Montreal, Canada, office of Inovia Capital — cite their gotta-have factors for a successful VC pitch:

1. An experienced team. In today’s economic climate, many VCs consider a successful track record with at least one previous start-up essential to success. If you have a great idea but no entrepreneurial experience, recruit an executive to your team to lend start-up credibility. “You’ve got to find office space, do marketing, motivate everyone, sell, deliver, raise money, and keep investors happy — all at the same time,” Sagar says. “Good judgment in business comes from experience. I want to see people who’ve already made their mistakes and struggled.”
2. A problem-solving product or service. Clearly articulate the problem your company solves, Elton says. Do you save customers money? Time? Why will customers switch from their current product or service to yours? “Often, people fall in love with their technology and don’t necessarily do a good job extrapolating that into a business-use case,” he says.
3. Assets. Sure, your company needs money. But what does your company offer an investor? VCs look for companies with tangible assets of some kind: a product, patent, manufacturing process, piece of software or service, established customer base, or proven management team. Start-ups should define their assets, properly describe them, and create excitement around them, Ferrara says.
4. Customers. A customer list is a concrete sign of success to offer VCs. In fact, VCs will expect you to have at least a few major customers. “We want to hear from happy customers,” Ferrara says. “We need to know: Are the dogs eating the dog food? Will customers renew? The only way to find that out is to understand the product and call the customers.”
5. Metrics. Know the hard numbers of your business — “data versus adjectives,” Elton says. “When somebody says, ‘We’ve grown tremendously,’ I expect them to follow up with ‘Here’s our traffic data. Here are the customers we’ve signed up,’” he explains. One of the most important metrics is your customer acquisition cost. How much does your company spend on marketing, on average, to bring in a new customer? VC funding often is used to acquire more customers, so be ready to tell investors how much your company could grow from their cash infusion.
6. A demo. Often, entrepreneurs blather on about their product or idea when a demonstration would be more effective, Elton says. To extrapolate on an old saying, a demo can be worth a thousand words. And a dynamic demo beats a static PowerPoint slide any day.
7. A plan. Many start-up managers pitch VCs without outlining a clear plan for using the money. “How many new customers would you get?” Ferrara asks. “You need to paint a really good picture that it might be a small company today, but with $5 million or $10 million put toward customer acquisition, it could be ramped into a substantial business.”

Source: Entrepreneur.com

Posted November 4th, 2009 under Tech Transfer

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