The 10 minutes or so an entrepreneur has to pitch an investor can often make or break the future of the startup. When the encounter goes well, millions of dollars in financing can propel an idea into a successful reality. But, more often than not, entrepreneurs don't nail the pitch.
The investors at New York City-based venture capital firm FirstMark Capital, for example, receive more than 1,000 inquiries from entrepreneurs each year. They meet with only a couple hundred hopefuls, and it can be clear within the first few minutes if an investment is worthwhile or not.
FirstMark founder and managing director Lawrence Lenihan and his team have seeded star companies such as the social-sharing site Pinterest, online ticket marketplace StubHub, and e-commerce platform Shopify. We sat down with Lenihan to find out what he finds most important in a pitch. Beyond having a strong business model, here are the three elements he considers most crucial:
1. Know the investment firm.
If you want to get on the radar of an investor, you'll want to know something about the person and what his or her interests are. "Because if you don't … I lose interest immediately," Lenihan says.
Venture capital firms,and sometimes angel investors,have areas of expertise or a theme in their investment patterns. Making sure your company fits that theme is key to your pitch.
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2. Know your numbers, and listen carefully.
Aspiring entrepreneurs must know the key financial drivers of their business. If a founder has to "get back to you" on revenue figures, it's a red flag, Lenihan says.
But they must also listen carefully when an investor challenges those numbers. "If I tell you I don't buy your model, I wouldn't expect you to say 'Oh, OK, you're right, let me go start over,' but I do expect a conversation," he says. Oftentimes, founders answer questions by repeating parts of their prepared presentation, unable to adapt or admit any areas for improvement.
3. Show why are you excited.
In other words, why is your company the greatest thing you could be spending your time on? "It's amazing how many people come in presenting their business in an almost clinical way," Lenihan says. "You don't want to be bouncing off the walls, but you want to be able to explain why this is an enormous opportunity you actually care about, with real concrete and tangible reasons."
It's about creating a personal connection with the investor. While it's important to identify a market poised for growth, to solve a pain point and articulate a customer acquisition strategy, investors want to work with people they like. The human side of a pitch meeting can be as important as the idea and the supporting data, Lenihan says.