How to impress the money men and women.
This piece was originally published on AllBusiness.
Entrepreneurs seeking funding always wonder what they must do to impress a venture capitalist. In this article, a number of prominent venture capitalists share exactly what they are hoping to see when an entrepreneur walks through their door seeking startup funding.
1. Know your competition
“I am impressed when someone really understands what their competition is doing. Too often people say they’re ‘the first, or the only,’ and then I do a quick Google search in front of them and turn up 10 others.”
—Howard Morgan, partner and co-founder, First Round Capital, New York.
Investment Focus: Seed financings, Internet, software, mobile
2. Know your key metrics
“Know your KPIs (Key Performance Indicators). Effective entrepreneurs understand what their top priorities are and manage their companies by focusing their teams around a handful of critical metrics that reflect those priorities. I’m always interested when a founder can articulate her KPIs, talk intellectually about her team executing to improve them, and has a clear sense of where those metrics can be in a year or two.”
— Josh Stein, Partner at DFJ Venture, Menlo Park, Calif.
Investment Focus: Enterprise software and services, SaaS applications, Distributed/Social Media
3. Do five key things
“It’s hard to impress most venture capitalists. They tend to be a skeptical bunch. The entrepreneurs who have impressed me the most do these five things: (1) they convince me they are dedicated , passionate, and know what needs to be done to reach their goals; (2) they show me there is a big market opportunity, that they can capture a meaningful amount of the market, and that they clearly understand their competition; (3) they understand their metrics and financials cold; (4) they demonstrate they would be good people to work with and are not afraid of risks; and (5) they convince me that we could make a kazillion dollars together and have fun doing it.”
—Patricia Splinter, Chief Operating Officer and Managing Director, VantagePoint Capital Partners, Silicon Valley
Investment Focus: Clean tech, China, Internet
“Success is no coincidence—it is 90% preparation. Do your homework on the firm and the individual you are meeting: who they are, what they know, and what they care about.”
—Mark Leschly, Managing Partner, Rho Capital Partners, Inc., Palo Alto, Calif.
Investment Focus: Digital media, healthcare, software, Internet, mobile
5. Show some passion!
“Yes, you need to appear professional if you are going to be starting a serious business, but you need to show some passion and enthusiasm. Start-ups are hard, and they take a long time, and you will need to show that you have the inner drive to get through the highs and lows. This doesn’t mean you have to jump up and down and wave your arms. Perhaps it’s a story about what is driving you to get into your business, why it’s personal, or why there is nothing else you would rather do than spend the next 5 to 10 years living and breathing this idea of yours.”
—Deepak Kamra, General Partner, Canaan Partners, Menlo Park, Calif.
Investment Focus: Early stage Internet and enterprise software
6. Know your financials
“Know exactly what you want to spend your money on. Don’t tell me how long it will last; tell me what you want to prove. The most impressive entrepreneurs communicate the value of their businesses through numbers. A conversation centered on a company’s revenue growth, sales funnel, and customer churn causes an immediate connection with investors because when entrepreneurs position themselves as metrics-driven, it’s as though they’ve entered an investor’s mind.
“A CEO’s leadership and marketability can’t be understated either. Sometimes a company looks terrific on paper, but if the CEO doesn’t inspire confidence in the first meeting, this shortcoming will doom the investor’s appetite.”
—Mark Patricof, Founding Partner of Mesa Ventures and Founder of advisory firm MESA Global, New York