Tech funding is a hot topic and more than £1.1bn in VC backing is flowing into the capital’s tech businesses at the moment.
Our own business is currently raising £2.5m of growth funding from VCs. Here are some of our experiences to help set tech entrepreneurs up for success when it comes to the big pitch.
All tech entrepreneurs are passionate about what they do. That passion can naturally lead to overconfidence. If you don't ground your pitch in the real, you risk trying to sell what you're not set up to deliver.
Most financial backers can see right through that. If you are clear about your immediate audience and the problem you can solve, it makes it much easier to sell.
A succinct elevator pitch shows you’re not trying to take on the world, and makes the benefits clear. Many VCs will have a minimum market size they are interested in. If you cannot answer questions about the market size with confidence you are not ready.
We’ve all watched Dragons’ Den and have been irritated when a pitch goes sideways. It often comes down to a few common mistakes, like trying to hide negatives or not having the numbers to hand. Sometimes it’s all about the details. We were lucky enough to have clients on board like Nestle and General Mills, so we could show results. If you can give real life examples of your delivery in action, they will help VCs to understand.
The quality of the team is the first thing VCs will look for. Let a few stars shine without a large team of directors and advisers, which could suggest insecurity or indecision. The leadership team should be fully engaged, and ideally everyone should have invested and be prepared to follow their money. In initial meetings, you are only going to get around 20 minutes so you need to make every second count.
Practise your demo hard and make sure there are no technical glitches. The purpose here is not to explain the technology, but show a product that potential clients will be wowed by.
A successful initial meeting with a VC will lead to a Heads of Agreement and then to due diligence. This will likely cover technology, commercial, financial and legal issues. From day one, we’ve run our business with the reporting and controls you’d expect from a big company, and this certainly helps the due diligence process.
It’s vital for a startup to know what this process involves, otherwise you can hit snags – and, if funding disappears, your reputation can too.
In the initial meetings with VCs, keep in mind that this is a dialogue. You need to be sure that these are people you can work with. Some VCs can lose sight of that. I’ve had meetings where I’ve left knowing that business would be the wrong partner.
Finding a VC partner who is genuinely excited about your product is worth the effort and opens the door to expansion and growth. You may have to kiss a few frogs along the way before finding your VC prince.