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SMART ANSWERS
By Karen E. Klein
MARCH 30, 2000


Be Prepared: The Art of Pitching to VCs

Keep focused, and make sure you have an answer for just about any question

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Q:  I am going to venture capitalists to pitch my company. How do I prepare?
-- A.R.

A:  The standard pitch to professional investors is a brief, well-rehearsed Microsoft PowerPoint presentation that includes a Web site mock-up or professionally produced prototype. Such meetings seldom last more than an hour (you may get a bit more time if someone referred you personally). Find out beforehand when the meeting will start, when it will end, and who will attend. Plan your presentation accordingly. For every 10 minutes of presentation, expect 20 minutes of questions.

State what your product is -- in English, not technobabble; who your customers are; how you will sell your product; how many people will buy it; how much it will cost you to produce; how much you'll charge your customers; when you expect to be profitable; what exit strategy you have planned -- sale or IPO. Specify how much money you're looking for and how you'll use it. Be realistic with your sales projections and back your numbers up with research.

Don't be the first to discuss exact terms of a deal -- those negotiations come later. Granted, that's much easier said than done. Practice and record your presentation so you can assess how compelling -- or unconvincing -- your spiel sounds. Try to anticipate all questions. "Any crisp answer, even if the VC partners disagree with it, is better than stumbling around and saying you haven't thought about the question," says Elton B. Sherwin Jr., managing director of Ridgewood Capital, a VC firm in Palo Alto, Calif., and author of The Silicon Valley Way.

TOUGH CROWD.Think of the pitch as a sales call with the toughest of audiences, Sherwin advises. Venture capitalists weed through perhaps 100 business plans a week, sit through maybe 100 presentations a year, and eventually invest in 5 -10 companies. Their goal in meetings is to eliminate the 90% that aren't for them, says Burt Alimansky, managing director of New York City's Alimansky Capital Group Inc. Introduce your management team and explain what they bring to the company. Take the opportunity to quiz the VC firm yourself. You want to be sure they're the right partners for you.

Make your presentation as easy as possible for the investors to comprehend, but not too slick -- or the VCs may think you're trying to snow them. Pleasant is good, but humor tends to backfire. "If you want to be cute, go to a comedy club," says Alimansky. Watch out for trick questions, such as: "What if we want to bring in a CEO after six months?" That might be a way to determine whether an overinflated ego is going to get in the way of building a viable company.

The worst mistake you can make? Ducking a question. "You must be prepared to answer basic questions in one or two [clear] sentences. If you can't, you appear unprepared and indecisive, and people will start to tune you out," Sherwin says. You seldom get a second chance. Venture partners generally have a good idea which projects will get the green light after that first meeting.

Here are some online resources on venture capital:

The National Venture Capital Assn.

The Venture Capital Resource Library

Garage.com, which provides entrepreneurial training and listings of VC firms and angel funds

PricewaterhouseCoopers Money Tree Survey is also a good resource for industry stats and information on deals

Two books that experts recommend, in addition to Sherwin's, are: The Venture Capital Handbook," by David J. Gladstone, published by Pearson PTR; and The Entrepreneur's Guide to Preparing a Winning Business Plan and Raising Venture Capital, by W. Keith Schilit, Pearson PTR.



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