Rodney – Welcome to the Atlanta startup podcast, the grouping room for the innovation ecosystem. I am Rodney Morris, an associate at Valor Ventures and your host for today.
Cariana – Hello everybody! We have three analysts from Valor Ventures today. We have myself, Cariana Morales, and Rodney Morris and Amanda Li. Do you guys want to introduce yourselves real quick?
Rodney – Sure. My name is Rodney Morris and I am a Morehouse graduate. I am happy to be here to provide some insight to founders of how to efficiently speak to investors.
Amanda – Hi everyone. This is Amanda. I’m an associate at Emory. I have been working with Valor for the past two years and I have done a lot of calls with founders. I want to shed light on things we’re looking for throughout a meeting and how we pass or not pass on the entrepreneurs to the next round and onto our partners.
Cariana – Awesome. And I am Cariana Morales. I’ve been with Valor for a couple of months and all three of us have worked quite a bit on sourcing founders and hearing a lot of pitches. We are here today to give some feedback and insight about what we’ve heard. We know that pitches are a very important but very daunting part of the sales process and getting investors. There’s no rule book, so it’s a little bit scary. So we’re here to provide some clarity and see how we can help everybody out with making their pitches the best they can be and target them towards investors. So Amanda, do you want to start off and tell us a little bit about some of the best and worst pitches you’ve heard during your time at Valor?
Amanda – Yeah, for sure. We always run through a list of questions, but during the best and worst pitches I always enjoyed the founders part. I’m looking for founders who have a passion for what they are doing and to demonstrate why them, why they are the right team, why that person is the right founder for solving this problem. A serious thing I’m looking at is how Valor could work best with his founder, what they need most right now, and why a fund like us is a good fit. I’ll start off with the problem and the founder fate aspect. So I’ll give an example. I think one of the best pitches I’ve heard came from a founder who is building an athlete remote tutoring system and her background is in enterprise, but her personal story really relays. She’s a mom, and she has a son who is an athlete. His schedule is really hard to coordinate with the tutors, especially remote tutors. That was a problem she experienced firsthand. When she told that story in her pitch, that really shows she owned her story and she has a belief in the importance of solving this problem. Because of her experiences she shared, she would send her son to practice and she would chat with other parents and coaches. She said “I’ll buy pizza for the team” in order to do her customer discovery interviews and she said she had a page contact list of the coaches. Those details really show. It’s very powerful because it showed who that founder is and why she cares so much of about the problem that she’s trying to solve.
On the flip side, the worst pitch I would say, like most of the founders I have heard, have a passion of what they are doing but some of them are like “oh, I just came up with this idea from almost out of nowhere.” That is a red flag because when we will be sourcing deals, we are looking for founders that will hopefully one day have a successful exit. To see that person have a passion will demonstrate they have motivation to solve the problem. They will have the persistence to solve the problem down the road. They are not just like “one day I have this idea” and the second day that will probably change to another idea. So we’re looking for that reason, like why that person? I would recommend founders to really own their story and believe in themselves.
The other two aspects I want to touch upon is fund fate. So about Valor. While we are doing due diligence on the founder, I think it’s very important for the founder to demonstrate why they reached out to us and why they picked us to pitch to. At the end the conversation, we always ask what are the two top two challenges growing their businesses right now and how can we help them besides just providing capital. This is a place where I get a sense of whether the founder is clear about what the key milestones are that they want to hit. I work with this round of fundraising. The best pitch is very clear. You know, saying “here’s the top two challenges. I saw you have blah blah blah on your Innovation Council that I would love to be connected with” or “oh, I know you have expertise in software because I saw this in your portfolio company.” Ask “could you provide some insights on partnerships and people you have been working with?” I think it’s very important for the founders who research the VC fund they reach out to because as I said earlier, it’s a very longterm relationship that lasts 7 to 10 years. It’s very important to make sure both sides are a good fit. So demonstrate that in the conversation. It’s very impressive. On the flip side, if you just randomly reach out to us and really don’t know much about Valor and don’t know how we could help you besides capital, that’s another thing that’s in the worst pitches I have heard. Also, a practical tactic that could be used is you could look up blogs like Valor has. We have a list of questions we ask founders and check out our portfolio companies. Maybe reach out to some founders in your network who had been working with us just to get a sense of who we are and why you’re a good fit, as those two aspects are very important. I’ll pass it onto maybe Rodney and see what has been his favorite pitch and why?
Rodney – Yes, thank you for providing that information, Amanda. My favorite pitch will have to be. . . I won’t give it a specific example, but I’ll give an example of the things that my favorite pitch was composed of. It’s definitely some of the things that you’ve mentioned, Amanda. I think for a founder, when you’re speaking to an investor, it’s very important to be able to demonstrate that you have a validity of your idea, which means that your idea is actually something that the market needs and you know exactly your competition. You know exactly what type of market share you will be able to actually be able to carve out and you actually have that grit about yourself. Because being a startup founder myself, we do realize that it’s going to be a lot of hard times and it’s going to be a lot of depressing moments so to say. Therefore, be able to demonstrate that passion, as Amanda mentioned, and that grit aspect. I will say some of the things that you should not do as a founder that is pitching an investor is you never want to over-talk an investor because an investor also has to ask questions and they also have to make sure that there is a match. Amanda was speaking towards being a match for a VC. As a VC, as an investor, we definitely have a criteria that we have because we definitely can’t give everyone an investment. We want to actually make sure that we give the right people their investment — the people that we can add value to, grow with, and help these companies within the next level. As a founder, you could actually be very excited to be on the phone with an investor, which we definitely understand. But at the same time, you don’t want to over-talk investors and you actually want to be able to answer the questions and be able to present yourself in a way that we can have a conversation and not over-talk the investor for 30 minutes. What would you say, Cariana?
Cariana – I think those are all great points and I’ll touch on the first point that you had about differentiation. Personally, the first two things that catch my eye and the first two things that I want to hear within the first 5-10 minutes of the call is market attractiveness and then differentiation within that. If those two things don’t exist, for all of the other information that you’re going to provide me following it, I’m still going to be wondering about those two aspects. I’ll start with market attractiveness. I think that it’s so important to convince investors that this is a problem worth solving. Obviously, as a founder, you know it is because you’re spending your day in and your day out working on it. If it wasn’t worth it, you wouldn’t be doing that. So you know it’s worth it, but convince us — use some numbers, use some growth projections, tell us how the market has looked in the last five years, tell us how it looks now and how it’s going to look in the next five years. Really give us that understanding of how the market exists and how it’s going to be trending. The second part of that is the differentiation. You are the expert and the people who work in VC know a lot about a lot of industries, but they can’t be expected to know absolutely everything. So you’re the expert in the industry. You have to tell us how you stack up against your competitors to convince investors of the differentiation because you’re the expert in the industry and you know exactly why your product is different. Why does the consumer need it? Be very, very clear when explaining this to investors because if you’re able to convince them that the market is attractive and you have a differentiated product, then you’ll be able to catch their eye almost immediately.
Rodney – Great. Great. I definitely agree. I also would add as a founder who was speaking to VCs and investors and attempting to receive funding, I think it’s very important to do research on your venture firms. Amanda definitely spoke to this. You want to make sure there’s a match. In today’s world, every VC has a website and if not, that’s kind of a red flag to be honest. Therefore, you could actually search the website. You could definitely figure out what a VC and their criteria is. For instance, if you search Valor’s website, you will definitely see that we invest in post-product, post-revenue but pre-profitability companies. Automatically, if you do not fit that criteria, then it may not be necessarily worth reaching out to us. Maybe you want to form a relationship for the future if you feel as though your business will be able to get there. As a founder, being able to just figure out that criteria when you’re actually researching the VC firms when you’re reaching out will definitely save you a lot of time, effort, and disappointment. Actually getting a “no” is always disappointing to everyone and we’re operating a business as well. Therefore, we don’t like to do that. But at the end of the day, we have to do that. We try to add some feedback and some valuable components when we do say no. As a founder, it is very important to just do that preliminary research. Therefore, you know exactly what you’re doing and exactly what conversations you’re getting yourself into.
Cariana – I think that’s a great point. Rodney, I know Amanda touched on when you’re looking at the website, also look at some partnerships and see if those are viable. Are there any other things that you think are important for a founder to look into when screening a VC?
Rodney – I would say when you’re actually looking at a VC as well, look at the value that they provide to their current portfolio companies. This is something that I’ve heard and some things I definitely believe is true. It’s something I think founders should do as well because some founders will have a lot of VCs that are actually trying to obtain their business, right? If you have a very attractive business, it’s a hot market and you have the numericals and analytics and the data, you may have to be on the flip side of the situation where you have to carve out VCs and figure out which ones actually match you in the best way. In order to do that, a great way is to actually reach out to the portfolio companies and really see if this VC is adding value. Are they introducing you to people that are actually propelling your business? Are they actually helping you with customer introductions and actually helping you to grow your business? It’s going to be very important as well. What you don’t want is a VC that just writes a check and you will have to differentiate yourself between those VCs. I think that’s important as well — being able to realize and do your research and understanding this VC is going to add value and actually help you grow.
Amanda – Yeah, I definitely agree. Another thing you could also check out is because you essentially are working with a partner of the fund and oftentimes those profiles of the partners out in public are available. I will look at their industry expertise, whether they have like specific expertise. Maybe they have been working in the wine industry for four years and that industry is the industry you’re in and the industry you’re about to interrupt. They have a lot of connections that you can leverage. I would definitely recommend looking specifically for the partners in the fund in conjunction with the fund itself.
Cariana – I think that’s a great point and I think you guys can tell me how you guys feel about this, but personally, during our first initial scoping call, if a founder asks me questions at the end about learning more about Valor with the intention of understanding if it’s a good partnership, I appreciate that. I think that that really shows that they’re 1) very serious about getting capital if they’re scoping out VCs and making sure they’re a good fit and 2) it’s just they’re doing their due diligence and trying to understand different options for them as well. I think that that’s absolutely something that you could work into the first conversation as well beyond the initial research that you find online.
Amanda – Definitely.
Cariana – Okay, another question for you guys. Are there any absolute no-no’s when giving pitches? Is there anything that founders have done that has really turned you off and you said this is not a good fit immediately?
Amanda – I can start. I think sometimes we will ask for numbers. For example: what’s your last month’s sales? What’s your growth rate? How many customers are on your waitlist to try out your product? For those basic stats, if a founders cannot tell, it is not super difficult. It’s deeply relevant to yourselves. Those are really key stats. If you cannot tell me on the spot, that’s kind of a red flag. As a founder, if you don’t know about your company, then I have some doubting in that. If someone cannot get those really important stats on the spot, that’s a red flag.
Cariana – I think that’s definitely a great point. I’ve had some founders say, “Oh, I don’t cover sales. I don’t necessarily know those numbers.” But if you have an upcoming call with a potential investor, I think it’s really easy to contact your sales people and get all of the potential information beforehand. Make sure you go ahead and do that to Amanda’s point.
Rodney: Yeah, I think actually not being able to demonstrate your numbers for a VC who says that they invest in post-revenue and post-product is definitely just showing that you wasn’t prepared for the call and you didn’t do your research. I’ll add that you want to be able to have a founder that you could actually talk with in regards to just adding feedback because you want to be able to grow together. I think if you get into an aspect, as a founder, if you can’t take feedback from someone and you’re always on the defense, that can be a red flag for us because we want to help you grow your business. We want you to be able to be feedback driven, to be honest, because you want to be able to accept this feedback and actually take it and be able to grow from it. So that’s a red flag for me. What about you, Cariana? What do you think are some no’s from the calls that you’ve had with founders?
Cariana – I think a few that are just more on a common sense side, but I think they’re worth bringing up. One is that make sure you’re answering all the questions very specifically. I’ve had some founders dodge a few questions. I’m not sure if that was intentional or if they were just wanting to bring a different point across. For example, there’s a company that has two sides, so they’re an intermediary between a business and a consumer and they technically have two sources of sales they need to make or two different markets that they need to touch in order just to bring those together. I have had founders talk a long time about maybe the business side and then I want to know a little bit more about the consumer side and they’re not answering my specific questions about that and they keep gearing back towards the business. That means that by the end of the call, I didn’t really have a good understanding of the business as a whole. I think if you’re listening very carefully to the questions and making sure that you’re answering them concisely and intentionally, that’s very helpful for investors. As both Rodney and Amanda mentioned, they have a lot of questions they’re trying to get across in the X amount of time that you have on the phone call, so make sure you’re being thoughtful of their time and entering their questions appropriately. I think it’s really important.
Cariana – Are there are any other no-no’s you guys have experienced in your time so far? Anything that anyone has done to really, really set them apart and has been one of the best founders you’ve talked to?
Rodney – Yeah, I’ll say to really set yourself apart is being able to really show and demonstrate on the call exactly what we’re looking for our criteria basis. It’s like you’re already prepared for this call. You did your homework. You did your research. You know exactly what we are looking for. You know exactly what we specialize in and you’re confident about that because you’ve done your research and you know that you meet this criteria right. You could very effectively communicate that. I think that’s very, very impressive. From that aspect, you already have our attention because you were able to demonstrate that you are post-product and post-revenue. You meet our numericals, you know, basis and you know that we invest in software companies in the Southeast with diverse founder. You are able to hit those points and then you are able to efficiently answer any questions that we might have. You’re able to demonstrate why Valor is a fit and why you’re raising capital and what you’re going to do with this capital. And I think that’s very impressive. What about you, Amanda?
Amanda – Yeah, for sure. I think another aspect to add is the industry expertise that Cariana touched upon earlier. Show us how your past experience is so relevant to solve this problem and why this problem needs to be solved now, not two years ago and now two years down the road. It is why the problem is so urgent that you –this founder, this team — has to solve it right here, right now. Demonstrate that industry understanding and the urgency of that problem needing to be addressed today using the solution you are trying to build. It is very important for us to understand. It really impresses me if you really clearly have a clear understanding about that. How about you, Cariana?
Cariana – I think that’s a great point, Amanda. I was definitely going to bring that up as well. I think during the best pitch that I had, it was almost like the founder was able to anticipate my question. They had the answers ready to go. I think part of that was that she was a previous founder, so she had already gone through this process. She knew how it went and she knew what investors are asking. But if you don’t know what investors are asking and you are just starting out pitching and you haven’t talked to a lot of investors, there’s a lot of options online to look up potential questions. I would go through all of those and just make sure you have an answer to them. When an investor asks you, you’re prepared. I know Valor’s website has a blog post that talks about all of the questions that we ask on calls and those are real. Those are the actual questions that we do ask. If you’re talking to us or a another venture capital firm, having those questions and answers to those questions already laid out will help the investor know that you were able to anticipate the questions and the conversation will go quite a bit smoother.
Rodney – Absolutely. I will add that one of my mentors says “timing is everything” just based on what Amanda was saying. I didn’t get that growing up and I’d just be like, “Oh, he’s crazy.” But now that I’m older and especially as an investor in VC, timing is everything. Therefore, like Amanda was saying, the time has to be right for your business and it also has to be a market that is ready for disruption or is ready for your idea. So talking to founders who understand that the validity of their idea that their differentiation — why them, why this idea, why now — is very important as well.
Cariana – Yeah, I think those are all great points. What are your guys’ thoughts on the actual pitch deck? I know those often go hand in hand with a lot of the calls. Whether we see the deck before or after the call, it is still an important part of what investors look at during that initial screening. Do you guys have any feedback for great ones or not-so-great ones that you guys have seen and whether that helps or hurt their process of talking to investors?
Amanda – Yeah, I can start. The first is a team. Sometimes most of us have a LinkedIn so I think putting an LinkedIn link to your team members is very important. Sometimes I will get a first name and a picture on a deck and I cannot find that person. We also need to do kind of a brief research before our call. It’s really important for me to understand who is on your team. Definitely have that information available. Another thing is use as many numbers as possible. You don’t need to run me through the whole financial model you build but have the key stats as backup if investors ask after the call “Oh, could you send a copy? or “How did you get this number?” I think it’s very helpful, but definitely use as many numbers as possible to support your argument for the market and for your sales projection. Have clear assumptions of how you came up with that number. Most of the numbers we see are really ambitious projections but it’s really important for us to understand how did you come up with that projection. For example, if your last year’s sales is $10K and you’ll project this year you’ll reach $1M, it’s possible but you need to help us understand. Yes, last year I was testing and now I have like this pipeline and I’m going to sign this big contract. Help us understand what is backing those number is also important besides those numbers themselves.
Rodney – Yeah. Great points, Amanda. I’ll add that your pitch deck is supposed to be key points, great highlights, and an overview of what you’re doing. It should not be long. It should hit those key points and it should be able to raise my attention like “Okay, I want to learn more” and that’s when we could get into asking questions off of your pitch deck. I don’t think that it should be an aspect of information overload. I think it should be key points and I’m just hitting those key aspects. What do you think, Cariana?
Cariana – I agree as well. I don’t think it needs to cover everything as long as it hits the main points that are relevant so that we can inquire more about those main points. I think that’s what’s definitely important. I think Amanda and Rodney touched on all the great content. I will say personally, and I’m curious to see if you guys agree or disagree on this: how polished the pitch deck is to me is a representation of how much the founders care and how many resources they’re using for pitches. So, for example, if I see a pitch deck that has a few numbers here and there and it is kind of put together haphazardly, it shows that there wasn’t as much effort as could potentially be put into the pitch deck as there should’ve been. But if I see a pitch deck that has, you know, the beautiful graphics and has some great visuals and looks extremely polished and professional, my thought is, “Oh, this founder really cares and they found the resources necessary to create this great presentation. They’re really all-in on this process.” I know that is a little less tactical and it’s a hard skill to have if you aren’t very versed in PowerPoint or Google Sheets or whatever you’re using. But I think there’s still a lot of resources online in order to just get that most polished option because in this world, as in the real world as well, first impressions can be everything. And I think that’s definitely one aspect of them. Do you guys agree or disagree with that point? Does it matter a lot to you what the pitch deck looks like and how polished it is?
Amanda – I agree. I would say definitely it’s not how beautiful the deck looks, but how professional it looks like. Clean. It shows like how much you care about the process. I totally agree. I would look for a professional, clean deck.
Rodney – Yeah, I’d agree with Amanda. We realize that everyone isn’t creative so they might not have the most beautiful deck, but I guess you do have to understand — well not even guess, you do have to understand — that for investors we look at a lot of pitch decks. Therefore, it’s like when I’m an HR person looking at a thousand resumes, right? It looks like the one that is not formatted right or something of that nature, they tend to spend less time on that one. We definitely want to have one that is professional. I would like to add that we definitely are in a pitch deck type of a industry. I’ve seen where people write business plans that have been like 10 pages and things of that nature. That definitely is not something that you want to do. You definitely want to compress that information to a pitch deck that has the key points of your slides.
Cariana – Yeah. Someone has tried to pitch to you with a 10 page business plan, Rodney?
Rodney – I’ve seen that. Yeah, I’ve seen it.
Amanda- That’s very detailed. Cariana, you kind of touched on this point earlier about the last question we often ask founders is “what questions do you have for us?” It’s very important, and like you mentioned already, some founders may ask you about detailed questions about Valor. What are some other questions that founders ask you that you feel like, “Hmm, this is very thoughtful question and is really helpful to kind of further our conversation in the future?”
Cariana – Yeah, I think that’s a great question. I think to a lot of your guys’ points earlier, if a founder asks a question that shows that they went on the website and they want to know more about something specific they saw, I think that shows that they did their research and they really care about the relationship with my firm and with Valor and continuing that relationship. So I think that’s definitely a good place to start. I think that I’ll kind of flip the question because I think that the questions at the end can hurt you more necessarily than they can help you. One of the questions that I don’t like to hear is “Oh, what are you guys looking for?” I think that is one that is kind of hard for us to answer beyond the point of post revenue, post product, hyper-growth technology companies. That’s the answer that we have, and then from there it’s a case-by-case basis. Whatever answer I give you, I’m not necessarily sure it would help you because you have your business made, and you’re on a certain trajectory. Whether or not that fits with Valor doesn’t mean that’s what we’re looking for. If you ask the question “What are you looking for?” and then we answer with something that doesn’t necessarily match exactly the route that you’re on, I don’t think that that means that your business is on a terrible track. It just means their relationship isn’t there. I think that question doesn’t really get either of us further in the relationships with each other. What about you, Rodney?
Rodney – I would agree with what you are saying. I’ve seen founders actually open the call with “There’s no need for small talk. If there’s a match, there’s a match. So let’s get right to it.” Wow. The thing is, as a VC we definitely want to know who you are, why you created this business, what’s your background, and things of that nature. That’s important. So if you open a call with “There’s no need for that because you know that that isn’t going to matter because at the end of the day, if there’s a match, there’s a match. And if it’s not, it’s not.” I don’t think that’s someone that we would like to invest in. So I’ve seen that. But as far as the questions at the end, you want to ask questions as a founder just to make sure that this VC is a match for you and if they could add value. Asking the wrong questions can hurt you, so make sure that you have the right questions.
Cariana – Do you have some thought on wrong questions?
Rodney – Yeah, just kinda like the one that you said. You definitely don’t want to ask “Am I a fit for you guys?” because I think that you should have done your research already to realize if you were a fit or not. That shows us that you didn’t do your research and maybe that you’re just reaching out to a lot of investors to just get any type of funding, which isn’t good because you want to be able to position yourself with investors that are matched with you.
Amanda – And it’s totally okay to ask what is a process look like. You can ask like “Oh, what is the timeline?” That is a legit like question you could ask, but I agree. Definitely understand like why you are fit is definitely a better question to ask then.
Rodney – I would like to, as a founder and for all the founders that are going to listen to this episode, we’re definitely happy to provide this information and be a resource to you all that a lot of information is online. You can find examples of Uber’s and Airbnb’s old decks online, so that can give you an example of what your deck should look like. We have a lot of resources at Valor if you go to the “Perspective” tab under our website, there’ll be a lot of things for you to actually be able to click on and be able to access so you can prepare yourself. We have a document called “Questions that VCs Ask” and things of that nature. So as a founder, I would definitely spend a lot of time listening to podcasts like this, of course. Just surfing the internet to actually be able to get familiar with the information that’s out there before you hop on these calls with investors and VCs because that’s definitely going to help you.
Cariana – Yeah, I agree. I also think that you can practice with people in your life that aren’t necessarily attached to venture capital because they’re still people and they’re still consumers and they still have an understanding of quite a few industries that your business might touch. Getting an idea from them if you’re appropriately communicating the problem and your differentiation for the problem I think could be done with multiple people that don’t have to be people who work in VC for practice purposes.
Amanda – Yeah, definitely.
Cariana – Great. Well, thank you guys so much. We hoped that we were able to answer a few of your questions and, like Rodney mentioned, there are a lot of resources online to supplement all the things that we said today.
Speaker 5: (34:04)
Yeah. And we hope that the audience that listens to us found that we are great people and great rock stars and we’ll be happy to provide more information to you guys, should you guys leave us great feedback. So please do.
Amanda – Yeah. Feel free to reach out to any of us if you have any questions about Valor.
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