Insider tips: Starfish Ventures investment director on how to pitch for venture capital
Wednesday, September 11, 2013/
Raising capital is a breakthrough for disruptive tech start-ups, so entrepreneurs need to hone their pitching skills as they develop their business model.
Given the importance of pitching, leading venture capital group Starfish Ventures is hosting a (sold out) how to pitch presentation during the Startup Spring Festival.
Investment director Tony Glenning told StartupSmart they receive over 1000 pitches a year, and conduct about 300 face-to-face follow-up meetings and pitches. They invest in one to two companies a year.
Glenning says many of the pitches are dismissed outright if they aren’t designed for a big enough market or don’t fit within the fund’s mandate: technology companies, especially life science and software.
“There are many great business ideas, but not all of them are suitable for venture capital. Venture capital is where we’re going to invest millions of dollars into a business ideally worth hundreds of millions, so you need to be reaching for that,” Glenning says.
Glenning says start-ups seeking venture capital need to be relatively well developed, and many companies don’t make it to a meeting or face-to-face pitch as they’re not far enough along in their journey.
“At the end of the day there is no hard and fast rule for what we’re after, but an ideal investment for us is where the founder or founders have raised a couple of hundred thousand, brought on-board a few team members, have launched their product or service, and they have an idea of what the end business model needs to be,” Glenning says.
While customer traction is important, Glenning says the team and the founder or founders come first in their assessment.
“Ideas and businesses evolve so what people walk in the door with probably won’t be the successful business in the end. So what we really want is great entrepreneurs who are flexible and can take feedback, and who are willing to do what it takes to fix the problem they’re trying to solve,” Glenning says.
While investors are increasingly backing co-founders over single person teams, Glenning says Starfish has successfully backed single founders in the past, and probably will again.
“Start-ups are a hundred times harder and better that other business,” Glenning says, adding they recommend co-founders. “Things will go well and things will go horrendously, so it’s invaluable to have someone on the journey with you. You need someone to high-five when you get that first customer and someone you can literally or figuratively cry on the shoulder of when things go badly.”
Once a company has reached the face-to-face meeting stage, Glenning says the main red flag is unworkable business models, such as relying markets that are hard to reach.
“You need a healthy business model, where the cost of customer acquisition is outweighed by the customer lifetime value. This is often quite a subtle thing to work out,” Glenning says.
Starfish Ventures are increasingly looking at emerging fields such as data-related start-ups, enterprise software, mobile, cloud-related start-ups and near field communication technologies.
“Some things are more appealing than others, but that changes pretty rapidly,” Glenning says. “We look for really green fields. There is a lot of activity in these areas, but we haven’t seen the perfect opportunity yet. But I’m sure there is someone somewhere, or lots of people in many places, who are going to make that work.”