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Pitching a Venture Capitalist on LinkedIn

Pitching anyone on LinkedIn with a connection or meeting request is a risky proposition, but more so with some professionals than others.

For example, not to diminish their importance, but an insurance agent pitching group health insurance to a small business owner on LinkedIn can afford to mess up a pitch more than an author attempting to connect with an editor from one of the three major publishing houses in New York.

Likewise, an entrepreneur who wants to land a round of funding from a venture capitalist (VC) has a limited market to approach and may not get a second chance if their first pitch goes poorly.

 

How Not to Pitch a VC on LinkedIn

There are some “cardinal sins” that you must not commit when pitching VCs.

DO NOT:

  • Send a connection request without a brief, cordial message.
  • Use a shotgun approach and do a “Connect with me” blast.
  • Send a connection request to a VC without doing your homework and learning their requirements. Don’t waste their time and yours if you don’t meet their criteria.
  • Send a long, drawn-out cut and pasted message that makes you look lazy and your request to be random.
  • Beg them to meet with you or flatter them with, “I know how valuable your time is.” Your time is valuable, too.
  • Embark on an endless “drip campaign” if a particular VC ignores you.
  • Send this tired message if your connection request is accepted: “Do you have 15 minutes for a quick call? Here is my calendar link…”
  • Try to close a deal over LinkedIn.

 

Instead, Do This…

Increase your chances of success by:

  • Sending a short, tailored message to the VC after reviewing their LinkedIn profile and website.
  • Getting introduced to the VC on LinkedIn or by email from someone in their orbit, like a mutual connection or a company they invested in.
  • Selling them on why they should take the time to have an introductory meeting with you.
  • Targeting VCs that you strongly believe meet your criteria and you meet theirs.
  • Waiting a week or two for a second message and following up 30-60 days later with a final message.

 

Successful Connection Messages

Here are several messages that have proven to be concise, yet successful.

 

Initial Connection Message:

Hello Sally,

I’ve spent time reviewing your profile and Rock Star Venture’s website. Since you invest in FinTech, I think a connection will benefit us both. I’d love to be on your radar.

Best Regards,

 

Follow-up Message (a few weeks later):

Hello Sally,

I wanted to let you know we’re currently raising $2M to $6M in a seed round. We have $2M already committed, including $1M from Best Lead VC. Our company has already generated over $500k in revenues, and we expect to reach $1.5M this year (our pitch deck is attached). Please email or message me if you or a colleague would like to chat.

Best,

 

Final Message (a few weeks after follow-up message):

Sally,

I promise not to approach you again after this communication, but I wanted to let you know our round is 90% full. I’d still love to chat about our opportunity with you. If you prefer, I can put you on our investor update memos. You can email me at…..

Yours Truly,

 

If You Receive a “Thanks, But no Thanks” Response:

Sally,

Thank you for the courtesy of your response; I won’t initiate further contact. If you think of any VCs I should reach out to, please let me know. Thanks again for getting back to me.

Sincerely,

 

3 Final Pro Tips:

  1. If the VC doesn’t respond after your initial request and the two follow-up messages, move on to someone else.
  2. Include: traction (status of investor commitments and current/projected revenue), size of the round, and valuation.
  3. Attach a pitch deck. Also, include any unique information you learned about the VC and their firm when you did your research.

And remember – – your goal is to get the conversation off LinkedIn, not close a deal.

Our best advice on selecting advisors

Launching a new company?

If you’re about to begin a new venture, before I get into who you should select as a CEO, board member, or advisor, let me first state a contrarian position – relying on startup boards and advisors to get your enterprise off the ground is overrated.

Initially, your chances for success are much greater when you surround yourself with a CEO and top-flight management team you’ve aligned economic incentives with to work 60+ hours a week with you in the foxhole. I’ve been shocked to see many boneheaded moves made by founders because “the board wanted me to do it.” Trust your instincts and lead your managers.

In fairness to your board members, you can’t expect someone with a high net worth and a busy schedule to be great at making judgment calls about your business if they only spend several hours a month thinking about it.

Remember that board members and advisors showing up for a one-hour Zoom call once a quarter when you and your hand-picked team are hitting the ground running every day won’t compensate for a lack of in-house talent. One way to spot floundering founders is pitch decks showing more board members and advisors than members of their management team.

 

Your advisors: bigger is rarely better

Having stated my position that relying on board members and other advisors early in your company’s launch is overrated and ineffective, let’s discuss how you should fill out your roster of directors and advisors when the time comes.

In short, I tell founders of startups to look for startup CEOs who have had successful exits.

Founders frequently assume that a VP at a Fortune 500 company would be a great advisor since “if they can do it at BigCo, surely they can figure out my little startup.” BigCo has much different challenges than a capital and talent-starved startup first penetrating the market while raising cash from investors and collecting from customers to make payroll.

Unlike the CEO or VP at BigCo, who had a slew of underlings to handle much of the dirty work, your team must be a generalist who can wear many hats and you want advisors who have done the same. The person who was “at Uber when it went from $1M in revenues to $1B” may have played a small, specialized role in that growth and success.

 

Do your board members and advisors have experience “beginning with the end in mind?”

Your board members and advisors must have experience raising money from outside investors. Pitching investors, keeping them informed, and making decisions with all investors in mind are keys to your success. Running a lifestyle business where you report to no one is one thing, but having outside investors who will hold you accountable is another.

The exit – selling your business – can be as challenging as the entrance – raising capital. Potential buyers will put you through the wringer, and board members and advisors who have experienced that arduous process can keep you clear-eyed and focused on balancing your business’s needs and meeting your suitors’ due diligence needs.

Surround yourself with a board, advisors, and mentors who have successfully sold their businesses. There are exits, and there are successful exits. When vetting advisors, ask what return on capital the investors received. Many entrepreneurs close businesses or bankrupt them and move on. There’s nothing wrong with that, but that’s a loose interpretation of an “exit” and clearly doesn’t indicate the track record of success you’re looking for.

 

Who not to pick as an advisor or board member

 

One cardinal rule when choosing board members and advisors – avoid ultra-high net worth individuals whose investments are not crucial to their net worth. They may be significant assets to your team and essential investors because they can help you raise capital, but they’re unlikely to roll up their sleeves and take the time necessary to understand your business and provide quality advice.

If you can’t find startup CEOs with successful exits to participate at the board level, other options are (in order of preference):

  • A leader with experience in startups and marketing executives with a strong track record of high growth on a limited budget. Sales traction is always the biggest challenge for any startup.
  • Someone with experience in your industry, ideally leading a small business to success.

 

Your plan B if successful CEOs have no interest

If you can’t find successful startup CEOs or other leaders with sales and marketing or industry experience, at a minimum, avoid these attributes in potential CEOs, board members, and advisors by asking these questions:

Attribute: limited time – “How many hours can you commit to every week, and are you willing to work nights and weekends?” (CEO)

Attribute: limited capital – “Would you consider making an investment in our business in the future as a show of support for the business to prospective investors?” (CEO, board member, advisor)

Attribute: limited experience – “How many boards have you been on? How have you been the most impactful on those boards? Can you provide a few founders references I can call?” (board member, advisor)

Attribute: vanity seeker – “Why do you want to join our board as a director or advisor?” (board member, advisor)

When you have the right people in place with the right amount of capital to work with, you’re in the position to start and finish strong. Let me know how I can help.

Questions to ask declining VCs

Let’s face it, as a founder looking to raise capital, most VCs are going to tell you no. The vast majority of VC firms invest in less than 1% of the deals reviewed, so don’t get discouraged. Use those rejections as motivation. To maximize the value from each interaction, ask VCs who decline to invest three questions:

May I put you on our investor newsletter?

This is an efficient way to keep fence sitters and curious prospective investors informed regarding your progress. As you hit milestones, you may see a few of the NOs reach back out to you unsolicited.

Now that you know more about our business, are there any VCs you recommend we pursue?

All VCs network with other VCs, and most are familiar with the investment criteria of the VCs with which they network Many time-starved VCs may not think about referring you out unless you ask, so ask at the point at which you are declined since your deal is fresh in their minds.

What challenges do you see in our business that may prevent us from raising capital or accomplishing our goals?

VCs are trained to be nice and not ruffle feathers. Many times you’ll get a generic reason for declining to invest (e.g., too early, doesn’t match our thesis). There is no upside for them to upset you as a founder. Doing so simply reduces the chances you come back to them for your next deal, and you may potentially trash their reputations to others in the startup ecosystem. This question will help you smoke out some candor from the minority of VCs who are willing to tell you what they really think.

Perfect Pitch Competition Winner – 5.16.22

Congratulations to the team at Polco who outpolled everyone in our pitch coaching competition. Our panel of judges, all active, early-stage VCs provided Polco and all the quality startups with excellent feedback to help the founders with their investor pitches. The companies that presented were:

  1. Polco – Winner
  2. TPA Stream – Runner Up

Elephant in a Box and Windscape AI also participated.

Participating Early-stage Venture Capitalists

BAT VC

Great North Ventures

Poplar Ventures

Quake

Render Capital

Unorthodox Ventures

Venture South

 

Important recurring revenue metrics

VCs love recurring revenue businesses, but don’t love it when founders can’t provide basic data showing the build up in revenues. There are plenty of recurring revenue billing platforms such as baremetrics and Recurly that provide default reports of critical data points such as ARPU, MRR, LTV, and churn. For companies not utilizing a billing platform that provides SaaS metrics, an Excel spreadsheet similar to this is a great way to start tracking this data both for internal consumption and to be shared with potential investors when fundraising: Customers

At Unbridled, we ask SaaS and other recurring revenue companies to provide us this data for the last two years.

 

 

 

 

 

 

Perfect Pitch Competition Winner – 3.30.22

Congratulations to the team at Resound for the resounding win in our first pitch coaching competition. Our panel of judges, all active, early-stage VCs provided Resound and all the quality startups with excellent feedback to help the founders with investor pitches. The five companies that presented were:

  1. Resound – Winner
  2. PlanStreet – Runner Up

Tailwind, xPress Run, and DiningTek also participated.

Pitch deck size & format

Back in the old days, entrepreneurs did crazy things like creating well-thought out, detailed business plans for prospective investors to review. In our TL;DR world written business plans have gone the way of the dodo bird. Most entrepreneurs create just one deck and use it for all audiences, which is a disservice to all as the deck is typically too general for savvy investors and too complex for angels.

I would create two pitch decks – a short deck that is 10 – 12 slides maximum and one that is much more detailed – perhaps 20 – 30 slides. Always send the short deck first. And when you pitch to angels and tire kickers, the short deck is all most will ever need. If you get too into the weeds with your deck, angels will pass on the deal because they don’t understand it.  Your goal with your initial pitch isn’t to get them to understand all the intricacies of your business in 30 minutes but rather leave them with the impression that you fully understand all the intricacies of your business. So, adhere to the KISS principle with angels – Keep It Simple Stupid.

A small percentage of your prospects will want to see more information, so tell all prospects a longer pitch deck is also available upon request. As Albert Einstein said, “if you can’t explain it, you don’t know it well enough yet.”  Creating the long deck will not only be beneficial to your savvy investors, but it will also help you better crystallize strategy and tactics.

The longer deck takes the place of the old school business plan. The people who will want to see more information, which will be limited to 10% or less of all prospects, will be those folks who have considerable experience analyzing and investing in deals – such as very active angel investors (e.g., someone who has done 10+ investments), angel funds, accelerators and incubators, and institutional investors.

You may also get a few novice angels requesting the long deck, which normally comes from subject matter experts (SMEs) who know something about your offering or industry. If the SMEs are in a closely-knit angel network in your town, they may influence others investment decisions regarding your deal. Make sure you give SMEs the attention they need. Some SMEs may be good mentors, advisors, and/or board members as well, so keep that in mind.

After creating your decks, practice your pitch with members of your team. Then pitch people who won’t be investing and get their feedback. Friends and family are fine as they will be candid with you whereas angels won’t – most angels will politely decline to invest to avoid offending (e.g. “great company but I don’t have the liquidity to invest now”). Also, the questions your friends and family ask will point you to the area(s) where you need to apply more KISSes. Don’t blow off their questions as naivete – most angel investors will get tripped up by the same complexities in your pitch as your Uncle Bob.

What should you put in the pitch decks? Here is one of the best articles I’ve ever read regarding pitch decks.  It’s an ideal article to help you craft your short deck. For your long deck, just expand on the topics in the short deck. Also, one trick I’ve seen people use with their long decks is to include an “Appendix” section. There you can shove in some wonky technical slides, detailed financial projections, or anything else you think only a select few but important potential investors would like to see. Most investors will feel like they don’t have to review and understand everything in the Appendix, but the content is there in case others want it. Kind of like having dessert on the menu!

One final point on introductory calls with potential investors – email them your short deck but frame up the choices for the introductory call so you and they know what to expect. In general, for meetings with just one or two prospects, tell them you have four typical formats that investors prefer and let them decide which one for your one-on-one meeting:

Option

Best for

Pitch via short pitch deck Most angels
Pitch via long pitch deck Subject matter experts / professional investors
Product demo Subject matter experts / anyone if a simple product
General chat and Q&A Time starved folks / angels following investors already in your deal

Be sure to tell your prospects how much time each option will take. Also, offering to do calls, Zooms, or in-person meetings on nights or weekends as well is an excellent way to convey to your prospects that you work hard on your business while simultaneously affording you perhaps more focus from prospects who have divided attention during the business day.

Investor updates

A huge unforced error entrepreneurs make is not updating their investors. Lack of investor updates is a great source of frustration amongst angel investors.

We have included a sample Investor Update report here in PDF format along with the Powerpoint slides referenced below.

Kentucky Select Fund approved as a KIFA fund   

Louisville, KY — Kentucky Select Fund, LLC (“KSF” or “Fund”), an angel investment fund dedicated to providing capital to early-stage businesses with talented management teams, announced its approval today as an Investment Fund eligible to make qualified investments under the Kentucky Investment Fund Act (“KIFA”). KIFA-enabled funds provide their limited partners (LPs) 40% tax credits for qualified investments within the Commonwealth of Kentucky.

“We are humbled by our LPs resounding support and appreciative of their embrace of our mission to provide critical seed and Series A angel capital to high growth startups and small businesses within the Commonwealth and throughout the United States,” commented Darren King, General Partner at KSF, “and we are thrilled that the Kentucky Economic Development Finance Authority has approved our fund under KIFA.” KSF has already begun exploring investment opportunities and is in deep discussions with numerous businesses with high growth potential.

KSF received commitments from a prominent group of angel investors from Louisville and throughout the Commonwealth. KSF’s limited partners embrace the Fund’s dual mandate of empowering entrepreneurs with much needed capital while simultaneously providing investors with an alternative asset class investment that is passive, diversified and capable of generating attractive returns. “There has not been a Louisville-based KIFA angel fund since we launched the Enterprise Angels Fund in 2014,” said Marty McClelland, General Partner.

Vik Chadha, also a General Partner at KSF noted, “The enthusiasm we received from Kentucky angel investors so quickly shows both how long overdue a fund like ours is in Louisville, and the greater awareness within investing circles that angel investing may be an attractive investment vehicle if done with the right discipline and focus.” Chadha continued, “And, our ability to provide our LPs with a 40% tax credit for Kentucky investments via the KIFA program makes our investment thesis even more compelling.”

 

About Kentucky Select Fund

Kentucky Select Fund is an angel investing fund based in Louisville, Kentucky. The Fund makes investments in startups in the continental United States in amounts up to $500,000 at the fund level and up to $2,000,000 when combined with syndication partners. KSF focuses on businesses with high growth, capital-light business models such as information technology (e.g., cloud computing, artificial intelligence, data analytics and business intelligence, SaaS, fintech, edtech, and enterprise software), healthcare (e.g., healthcare services, life sciences and biotech, and medical devices), and media and entertainment.

KSF’s collaborative model of providing capital and valuable mentorship through its robust network of accomplished limited partners resonates with startup entrepreneurs who are looking for value added partners to assist them with capital, expertise, and connections throughout their startup journey. More information about KSF can be found at KentuckySelectFund.com, including investment criteria, process, and a sample of the prominent angels who comprise the Kentucky Select Fund.

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