Presenting Your Startup To VCs. The Pitch Raises Interest. How You Answer Questions Decides The Deal.
The hardest part of an investor pitch to perfect is fielding questions. I break questions into 13 topics and explain how to handle each one.
This topic has come up in a few subscribers’ questions over the last month so I’m preempting my scheduled post today. The central theme across questions is, ‘Are VCs looking for the same strategic elements in a startup pitch as a C Suite team would look for in an AI Strategy document?’
The AI Strategy is just 1 part of what VCs are looking for. VCs think in risk frameworks especially in pre-seed and seed rounds. The startup’s strategy is just 1 piece of their risk framework. VCs know the strategy will evolve, likely changing altogether in the process of iterating and achieving early wins. The strategy will change again at each phase of growth.
Change, change, change, change means the strategy you present is proof you can come up with one. Talking about how you have iterated on early versions of strategy is a sign of maturity or lack of focus. Talking about how you expect strategy to evolve in the near and long term is a sign of maturity or exposes doubt in your long term vision.
There is no single risk framework or rubric to evaluate a pitch with respect to risk. Go into every pitch knowing the pitch is important. More important is how you handle the questions which follow or often interrupt it.
Questions fall into two objectives. They gauge your understanding of something or express a doubt about something. Answers must address the risks they see. It isn’t enough to have information. You need to make the business fit into their risk framework.
At the same time, your answer must not attempt to change their risk framework. It won’t work. This is where most founders get into trouble. Acknowledge the risks they see and explain your mitigation strategy. If you don’t have one, thank them for exposing a risk you had not considered and follow up with them once you have created a mitigation framework.
Risk is inherent with every investment and VCs have the highest risk tolerance. Having unmitigated risks is not a dealbreaker. It’s part of early stage startup investing. The maturity you display in synthesizing and responding to risk questions is critical to a successful pitch.