Thursday 29 September 2016

How to pitch your start-up properly to venture capitalists

So you've developed your business idea to the point that it needs money. Kernel Capital's Orla Rimmington on what VCs are seeking from you

Orla Rimmington

Published 26/04/2015 | 02:30

ADD CREDIBILITY: Orla Rimmington
ADD CREDIBILITY: Orla Rimmington

An important skill for any entrepreneur is the ability to pitch the product, service or idea they intend to sell.

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For companies seeking growth capital, well-delivered pitches to Venture Capital investors like Kernel Capital can be crucial to their success in securing the investment they need.

At Kernel Capital, we meet a constant stream of founders with new ideas and, on average, see around 300 pitches annually and make 30 plus investments a year. Personally, I see about five pitches every week and the quality of these pitches can vary considerably.

First-time entrepreneurs are typically not well-versed at pitching their ideas to VC investors and are often so close to their ventures that they struggle to see them objectively, through the eyes of potential investors.

My advice to entrepreneurs is to firstly put themselves in the investors' position and address the questions investors will be seeking answers to.

We don't expect founders to have all the answers, but it is important to have an appreciation of the questions.

To begin, entrepreneurs should articulate the problem they are addressing and their specific value proposition clearly, showing evidence of domain expertise.

In today's highly competitive business environment, it's important to focus on key areas such as product differentiation and defensibility in the market, competitive advantage and to show how and why your offering can beat the competition.

Another basic piece of advice is that entrepreneurs should always speak in a language that investors will understand and resist the temptation to overload them with data.

At Kernel Capital, first and foremost, we invest in people and aim to partner with entrepreneurs who demonstrate exceptional vision, ambition and ability.

During their pitch, founders should strive to tell the story of their company and bring across their passion and vision for the business. Ideally a pitch should include a demo of the actual product or service.

Pitches should also provide a clear description of the business model and establish the exact point in the supply chain that the product or service fits. For example, is it appropriate that those who may use the product or service will buy from a start-up - and, if they will, what is the route to get to market successfully?

Entrepreneurs need to know their business plans inside-out. They must be clear on how much funding they require to get them to the next stage of value creating milestones.

Being transparent with investors is also key, as VC investors appreciate honesty from the outset. We have first-hand experience of the challenges and opportunities early-stage companies face. Presenting your business strengths is expected, but pointing out weaknesses and problems and then presenting your planned solutions adds credibility.

It is also important for entrepreneurs to target investors with a strong track record and ensure that their funding needs are in line with the investors' respective strategies.

Founders need to be clear about the value, beyond the growth capital, that their prospective investor will add to their business.

At Kernel Capital we are focused on investing in innovative technology start-ups with a particular focus on information and communications technology (ICT) and engineering. Within these sectors we invest primarily in intellectual property (IP) and 'know how'-driven knowledge based companies, where the company promoters can demonstrate to us their deep understanding of the problem/market opportunity and how they will sell in to the market.

We are most attracted to strong teams pursuing large market opportunities with a proven product-market fit. Even at an early stage, nothing speaks louder than traction in the marketplace and evidence that the company is sales focused.

There is no one single correct way to pitch to a VC. All entrepreneurs have unique skills and talents to offer - and some verbalise well, while others write well or have particular strengths with numbers. VCs appreciate that it takes different kinds of minds and a healthy mix of strengths and talents to make a world-class team.

With this in mind, my best advice to any entrepreneur seeking investment is to be honest and be yourself - but do not to forget to fine tune and practice your pitch.

Orla Rimmington is a partner at Kernel Capital. www.kernel-capital.com

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