This article is part of Tools of the Trade, a weekly series in which a variety of experts share actionable tips for achieving fast and effective results on everything from productivity to fundraising.
This week Mark Rampolla shares what venture capitalists want to hear in an initial pitch from entrepreneurs. Rampolla is the co-founder of Powerplant Ventures, a VC firm that invests in food and beverage startups.
As a partner at the venture capital firm Powerplant Ventures, I hear a lot of pitches from entrepreneurs. First impressions are critical. What you say and how you say it in the first five or 10 minutes of our initial meeting will likely determine if we even bother to evaluate your company’s potential. Though there are no magic words that will automatically get us to invest, here are some phrases we love to hear during a pitch.
1. “How much time do you have, and how would you like us to use it?” Starting a meeting like this shows us you’re thoughtful, respectful and a professional.
2. “Here’s why my company’s product or service is personally important to me.” We asked this question to Doug Evans, founder of the innovative juice company Juicero and he said, “If you cut me, I bleed juice. It’s all I know. It’s all I ever want to do.” We’re investing in you just as much as we’re investing in your business model.
3. “We’ve worked together for years and have always wanted to start a company like this.” Teams outperform individuals, and teams that have worked well together before outperform everyone else.
4. “I don’t know. Let me look into that and get back to you.” When you don’t know the answer to a question, we’d prefer that you’re honest. Being upfront instead of manufacturing an answer demonstrates humility, integrity, and consideration for our own intelligence.
5. “We’ve been working on this problem for years. We finally figured it out.” This indicates you’ve done your research and are committed to the company, i.e. it’s not a project you casually dreamt up over beer.
6. “We feel like we have the right strategy, but we’re still testing, learning and are open to input.” We are all still learning, and we want to know you’re fundamentally curious and open to trying new strategies.
7. “Here’s what our team looks like today, but we know we need to beef up X. The next three hires we plan to make are A, B and C.” This shows you’re aware of any current gaps in your team, and have a strategy for filling them once you receive funding.
8. “We’ve spent a lot of time with our customers in order to understand where they’re coming from.” We want to see that you’ve put yourself in their shoes. Why are they unsatisfied with the available options? What problem are you trying to solve for them?
9. “At a monthly revenue of X, we should be able to break even. We believe we can get there in 24 months, but if it takes us an extra year we will still have Y in cash. With a burn rate of Z, we can get through another year before we need to raise another fund.” We want to see that you know your numbers cold, without having to pull them up, and are already planning for contingencies.
10. “We were able to double revenue last year with little in additional distribution. We know that’s easy on a small scale, so we want to make sure we’re setting a foundation for long-term growth.” Getting too excited about early results signals to our team that your goals are too small.
11. “Our main competitors are A, B and C. These guys are tough and have done an excellent job at X, Y and Z, but here’s how we think we’re different. We’re focused on learning if that’s true, and if it matters to consumers.” This checks off so many boxes: it shows you are respectful, have done your homework, and are not overly confident.
12. “One of the biggest problems we’re having is…” The ability to bring up potential problems is an advantage. We want to hear bad news early when we can still fix it, because there will always be bad news.
13. “Beyond capital, here’s what we’re looking for in an investor….” There’s no perfect answer to this, but it helps us determine whether our firm is a good fit.
14. “We understand that as VCs you need to deliver a return, and we believe there is an opportunity to sell to A, B, or C down the line. However, we are focused on building a great company that can stand alone. We believe this gives us options if the right exit is not there.” Build and flip works for some startups, but we want to know that you are focused on creating long-term value.