Opinions expressed by entrepreneur Contributors are their own.
Building a tech startup is a long journey full of ups and downs, and every founder has to make some important decisions along the way. Here are some tips for pitching to venture capitalists, understanding their motivation and the key “don’ts” that will make an entrepreneur’s journey smoother.
1. Invest in your team
A startup’s greatest asset is its team. The product can change, the market and regulations too, but if your team members can adapt to new circumstances, if they can’t panic and work in unclear situations, it means your startup is sustainable. Invest your time, money and expertise in building strong relationships with talented professionals in your area. No matter what crisis happens, your team of like-minded people will be there for you. That means a bit of give and take. Don’t forget to be open to criticism. It’s tough, but the people you work with need to feel valued and heard. That’s why they want to be able to be open and honest with you. VCs challenge your leadership skills and pay close attention to the atmosphere between team members.
Related: How to Keep Your Startup Team Adaptable
2. Don’t look for your investor at the meetings
You don’t have to waste time attending dozens of events as a speaker or listener. In the first case, it mainly feeds your ego. In the second case, you are essentially afraid of missing out. None are useful for a startup founder, quite the opposite. Covid has taught us to engage in all kinds of social interactions online, so try to spend your time wisely and set up first meetings over the internet. Only attend a limited number of offline events where you can learn something new from real experts or meet people who could become a regular part of your network.
3. Burn bridges
This may sound scary, but for a venture capitalist, the fact that a founder only focuses on their startup is a must. Of course, there were cases where successful founders ran two to three projects at once, even cases where they held a full-time job while building their startup on the side. These are rare exceptions. Don’t consider these examples or rules because VCs don’t. You should decide if you are “all in” if you want others to give you money and trust your willingness to start a huge business.
4. Understand the VC logic
VCs will only consider those investment opportunities that are likely to achieve their goal of achieving a 10x return on investment. The time frame for this return must also be realistic. It should not exceed 5 to 7 years after the investment. Good business conditions are equally important, so we need to consider a combination of the investment amount, pre-money valuation, share ownership, potential dilution, purchase price, etc. The founder and the investor will be in the same boat for quite a long time. Therefore, it is crucial for them to understand each other’s motivations from the start.
See also: Understanding the VC business model
5. Inspire with your long-term vision
You must learn to inspire people with your long-term vision. In fact, this is the main difference between a great fundraiser and one of many. Such founders can sell the sense of exclusivity and co-creation of history. Do you think NASA’s janitor helped scientists send a man to the moon? The same logic applies here. Don’t just sell the company’s booth, convince VCs that you are a game changer and provide proof that you are capable of realizing your vision.
6. Ask for feedback at every meeting with a VC
When you’re working on your project 24/7, you probably fall into the trap of misunderstandings. Venture capitalists are a great grounding resource for you. They are experts looking at hundreds of startups every month. They are there to offer you a new perspective. Use it to your advantage and ask questions. And absolutely free, so grab the bargain. Sometimes it can bring you new ideas and insights for your business. Sometimes it can help you understand how to improve the pitch and make meetings with other VCs more efficient. Before meeting, make a list of questions, be as curious as possible. You’ll be surprised how happy people are to share their thoughts and give you feedback when they see you listening! Try to catch at least one idea, a new contact, or some small changes in the way you answer the questions.
7. Be aware that your business is a product
Always remember that from a VC perspective, the product is not what the company produces or sells, it is the company itself. Investors are the customers who buy that product with the intention of finding another customer and many times more get when they invested. The founder’s job is to sell this product and use all available tools and advice to make this business a reality.
These are the seven tips that really shaped my years of entrepreneurship and investing. They are easy. You are logical. And believe me, if you are successful with your startup, sooner or later you will come to these exact conclusions. I have always been grateful for the invaluable advice I received along the way. You led me to these tips. I hope these tips are the same pieces of advice that will make a crucial difference in your entrepreneurial journey and lead you to the success you seek and deserve.
Related: Why Strategic Venture Capital Succeeds in a Founder’s Market