The good people at
Alloy Ventures, a Bay Area VC firm, have compiled a really insightful list of
the "Ten Things That Can Make or Break a Deal". This is a compilation of the
ten elements that entrepreneurs should bear in mind when pitching to
early-stage investors. It’s a good read, and well worth your time to read it in
its entirety. Their list:
1. Referrals - will you be on top of the pile or the
bottom?
2. Management, Management, Management - do you have
the athletes?
3. Sustainable Competitive Advantage - what about
the 800-pound gorilla?
4. Business Model – if you don’t have “paying”
customers, you don’t have a business!
5. Momentum - are you giving them more reasons to
say "yes"?
6. Recruiting - a measure of quality!
7. Executive Summary - your first and often only
impression!
8. Portfolio Fit - Babe Ruth, Ted Williams or both?
9. Partner Politics - are you dealing with a
democracy or dictatorship?
10. Location - if it takes too long to get there,
I'm not interested!
The only things we would add:
1. Valuation - Go in with a
realistic notion of what your company’s valuation might be. We’ve seen too many
entrepreneurs with fanciful ideas as to what their business might be worth on
the basis of a) what they’ve heard about the valuation of venture-backed
companies whom they perceive as inferior; b) the amount of blood, sweat and
tears (not to mention credit card debt) that they’ve expended in getting their
business to this point; c) what their significant others think is reasonable.
Things have changed drastically since the bubble, and though it may seem unfair
that people that sold dog food on the web had pre-money valuations in the tens
of millions, the investors in those businesses are eating their own, ahem, dog
food now…
2. Crispness – Investors don’t expect entrepreneurs to have all the answers; by definition, early-stage ventures are defined by uncertainty. However, they do expect that reasonable questions about use of funds, competitive offerings, financial milestones, margins and so on will be met by more than blank stares, hand-waving, the fumbling through papers, and feigned illness in order to run to the bathroom to call one’s CFO. Be prepared and be succinct in your responses. When confronted by a question that defies a simple answer, be ready to walk through your company’s collective wisdom about the issue in order to demonstrate that you’re prepared to grapple with the inevitable hurdles that come with the territory of launching a company.
AS
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