Tuesday 19 September 2017

The secrets of making the perfect pitch to investors

Know your audience, your market and your competitors, writes Catherine Moonan

Catherine Moonan

FROM California to Dubai, and Dublin in between, venture capitalists (VCs) are all looking for something slightly different in an investment pitch. It's no harm for Irish tech start-ups to research their audience. In fact, it's one of the first things you should do when pitching or presenting.

Tom Dyal is managing director of Redpoint Ventures, based in Menlo Park, California.

"Redpoint currently manage funds of $3.4bn," says Dyal, "investing anywhere between $250k and $10m in start-ups."

According to Dyal, presentation style is an important part of a pitch.

"I'm not looking for a polished, rehearsed pitch. I'm looking for a clear communicator, a clear thinker with the right background for the opportunity. Someone who comes across as very capable of building a successful company," he says.

As regards the structure of an investment pitch, Dyal says he prefers to hear the following basics: "High-level concept, team background (and the fit for concept), target market and size, product details, go-to-market strategy, competition, financial plan (and not a return on investment, as who knows what the company will be eventually worth?).

"The biggest mistakes that people make in a pitch are using too many slides, giving content which is too detailed for a first meeting and not explaining clearly why now is the right time to start this company."

Dyal says he invests in both the idea and the person. "We try to connect emotionally with the entrepreneur as it is a long-term partnership," he says.

Redpoint hasn't invested in an Irish company yet, but Dyal wouldn't rule it out.

"We'd be open to investing in an Irish company, but probably not for a start-up as it is too difficult to help them from far away. We would be more likely to invest in a growth stage company there."

"Always start with an intriguing first word," is the advice from Bill Liao, Australian entrepreneur and Venture Partner with SOSventures, based in Cork. "Never be dull," says Liao, whose website on effective investment pitching is www.makeitcrisp.com.

So, what else is a VC looking for in a pitch?

Will Prendergast is a VC with Frontline Ventures which specialises in early stage software investing across Europe and has offices in Dublin and London.

"If you're fundraising, you need three documents," says Prendergast. "A one-page executive summary to engage, an investor presentation to run through on first meeting and a detailed 24-month financial plan if there is engagement beyond a first meeting."

He adds: "Every idea has the right time and the right team – you should be able to answer the questions, 'Why you?' and 'Why now?'"

Frontline VC has invested in Logentries and Currencyfair in Ireland.

According to Prendergast, a key trait of a CEO is their ability to hire.

"So we ask, 'Can this person hire great people?' If the answer is no, we would not invest. At the start when you don't have resources to hire a team, show how you can get experienced advisers around you who are willing to help," he says.

Eugene Smyth is an investment adviser and sits in on all the investment pitches to the €53m AIB Seed Capital Fund, managed by Dublin Business Innovation Centre.

"Research shows that the promoting team thinks the priority is the idea followed by the markets for the idea," says Smyth.

"The same research shows that the investor thinks the priority is the management team, followed by experience in the relevant markets."

He continues: "After establishing management skills, the promoting team should be like a returning expeditionary force, coming back from foreign lands, bringing back a map of the landscape in which the idea will have to endure and survive, hopefully blossom," Smyth says.

"Then, when the target environment is understood and the opportunity is described in terms of a problem solved or a great new entertainment, it's time to look in depth at the idea. The idea should be capable of being described in one short sentence or phrase that describes its core value relative to the problem it will solve."

Brian Caulfield is a Dublin-based VC with DFJ Esprit, a pan-European VC investor based in London, and part of the global DFJ Network of 14 funds around the world. In the past 18 months in Ireland, DFJ Esprit has invested in Movidius, Datahug and Mobile Travel Technologies.

"Companies need to be able to pitch their business effectively in 10 slides or less," says Caulfield, "with a maximum of 20 minutes for the pitch. The initial meeting would last 50 minutes. For an actual deal, you will meet various members of the team as many as 10 or even 20 times. If there is any question mark in my mind over the integrity of the person or I believe that they will be excessively difficult to work with, then I would not invest."

He adds: "In my view the single most important thing in a pitch is to convince investors that there is a large high-value problem to be solved. That should always come first. If you convince an investor of that, you have 'permission' to talk about the solution, the technology, the team, etc. Otherwise, I don't care."

Barry O'Sullivan invests in tech start-ups around the world as part of SVG Partners. "We recently led a $6m investment in Flint, a Silicon Valley Mobile Payments Company. I have also invested in Irish companies such as MCOR, SIsaf, Trustev," says O'Sullivan.

"I see a lot of pitches and look at specific areas of opportunity in enterprise software. I look for teams that are strong and confident. Know your market and competitors. I am not interested in tech companies without a technical founder. A tech company without engineers is like a band without musicians.

"In your pitch, be concise and cover the problem you are trying to solve, the opportunity, solution, business model, team. Be honest – don't pretend someone who is testing your product is a real customer, don't spin professional services revenue as product revenue. Be yourself – don't try to be someone else just because some pitch coach told you to show 'passion'."

O'Sullivan, who is also a 'Dragon' on RTE's Dragons' Den, assures me he is not referring to me in that last comment.

Jason Bowers is from Dublin and works as the sales and marketing manager with Sovereign Corporate Services JLT in Dubai.

"Local investment houses we work with here consistently refer to a good investment opportunity as one with a proven track record but with a new angle or previously untapped USP," says Bowers.

"My experience with entrepreneurs here is that the likeability (particularly the passion they display for their idea/product) is one of the most important factors when deciding to invest."

He adds: "Investors are busy people – they don't want to have to babysit a good idea, they want a return and must feel completely confident that the person pitching is prepared to pour blood, sweat and tears for their idea to be successful.

"If this is not instantly evident, you're unlikely to be asked for a second meeting or even hear the rest of the pitch.

"People invest in people, and attitude can be the biggest asset you bring to the room."

Catherine Moonan is the pitch coach with RTE's 'Dragons' Den' and also facilitates Perfect Pitch workshops on DIT's Hothouse programme, Tallaght IT's New Frontiers programme and UCD's Innovation Academy. Applications are open for 'Dragons' Den' until December 20 through www.bankofireland.com/dragons. This year, 'Dragons' Den' is encouraging applications from all innovators in third-level institutions

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