Improve Your Odds of Getting Funded by Matching Your Pitch to the VC's Investment Pattern
It was an unusually warm February afternoon, and my co-founder and I were sitting outside the Coupa Cafe in Palo Alto, pitching an angel investor, but something just was not clicking. Although our revenue growth was strong, our team was stellar, and our market was the perfect opportunity to generate the winner-take-all, monopolistic business that investors seem to love, the investor just wasn’t having it.
“I still worry -- really worry, actually -- about your guys’ ability to execute this. I can’t put my finger on it. But I feel it.” Suddenly knowing that (obviously) this investor was not going to bite, I started to realize that beyond perfect decks and personal impressions, there is something more to master in your pitch.
The problem was “pattern matching.” We weren’t aware of it.
The impression you make throughout your pitch is important, certainly, but there’s another aspect to an investor’s interest. Many investors choose their ventures based on predetermined factors. This is pattern matching, and understanding how it factors into the decision can help you make it work for you.
Pattern matching is the habit of an investor to evaluate opportunities based on what has worked before. If a Mark Zuckerberg-style social media entrepreneur walks into a boardroom, an investor may see the look and overall style of the person making the presentation and immediately recognize it as a good fit. This judgment may not even be conscious.
Before your next pitch, it’s important to find ways to make pattern matching work for you. Here are a few things you can do to improve your chances of success.
Research is essential.
Research is always recommended when you’re planning to step in front of an investor, but pattern matching means you need to start that research before you get the invitation to pitch. In addition to standard research suggestions, take a close look at every investor’s portfolio and choose those that are likely to be interested in what you’re offering.
One of the best resources for looking into potential investors is Crunchbase, which gives you insight into what an investor has previously backed, including the amount spent on each investment. If you aren’t sure which investors to pitch, you can also use this tool to identify companies similar to yours and find backers that might be interested in what you have to offer.
Maybe you couldn’t pass as Brian Chesky’s twin, but you have a great idea that will disrupt the on-demand accommodations industry. You can still demonstrate to investors that your product will match the performance of similar companies in the space.
Make sure you frontload your presentation with plenty of data that compares your brand to others, directly addressing the similarities investors are seeking in your presentation.
You can also use data to inform your storytelling, winning pattern-matching investors over. Kick off your presentation with a story about a product similar to yours, then follow up with data that shows the similarities between what you’re trying to do and what that successful company did. The investors will immediately see a correlation, and you’ll be more likely to complete the presentation on a win.
Don’t fake it.
In the end, the best thing entrepreneurs can do is to be true to themselves, before, during and after the presentation. Pretending to be something you aren’t to wow a specific investor won’t help if your pitch doesn’t match what your company represents. You’ll probably find if you can get a yes based on that pitch, the investor will require you to make changes that turn your company into something outside of your vision.
The theory behind being yourself is that it will attract the perfect investor to move your business forward. You’ll save yourself time, though, if you follow earlier advice to thoroughly research potential investors and narrow your list down to those with portfolios and interests that are a close match for your business.
Accept the pros and the cons.
There are issues inherent to pattern matching; many of them have been widely recognized. Pattern matching limits diversity and locks investors into a portfolio full of similar companies. If they continue to follow the same pattern, they may, in fact, miss out on new industries that could bring much bigger rewards than if they continued to play it safe.
Once you’ve accepted the pluses and minuses of pattern matching, you can make it work for you. You may be able to leverage your company’s uniqueness by building momentum on a crowdfunding campaign initially, for instance, then taking that large audience to an investor. Another winning strategy could be looking for investors who might specifically be interested in diversifying and embracing your differences, rather than trying to follow the crowd.
Because pattern matching will likely continue to be part of investment decisions, there are things entrepreneurs can do to play to this basic instinct. Careful research can make a big difference in not only identifying ideal investors but also connecting with them during a pitch meeting in a way competitors can’t.