Great Elevator Pitches: Delivery Matters

Elevator Pitch Series Table of Contents:

• Introduction
• 3 Key Lessons
• What to Include
• Delivery Matters
• Screwing Up My Elevator Pitch
• SVASE Presentation Slides
• 3 Additional Opinions

While the content of your pitch is its real meat, the way it is delivered has a dramatic impact the way it is received. Charlie Chaplin’s ability to create unforgettable characters and hilarious moments in silent movies demonstrates the power of non-verbal communication, which is at least 50% of your message. The most important factor is to ensure that the pitch conveys passion, but entrepreneurs should also definitely consider how their voice, facial expressions, body language and dress affect the reception of their elevator pitches.

Passion

Passion cuts across most forms of non-verbal communication. The tone of your voice should convey enthusiasm, your facial expressions should be excited and your posture should be upright and alert. Investors will feed off of the signals you give them and a boring monotone speech certainly won’t be compelling and may even distract from your message. Furthermore, passion is one of the elements an investor looks for in a management team truly passionate entrepreneurs can easily demonstrate it at every opportunity.

Voice

While tone is an important aspect of your speaking voice, pace, volume and articulation are also critical. Volume is important to ensure that your listener can hear you clearly. Speak too softly and nobody will hear you. Speak too loud and you’ll irritate your listener. However, volume can also used for emphasis by speaking softly at key points, which forces your listener to lean in and concentrate. Changing pace with a pause is another great way to emphasize a key point. A brief 1-2 second pause gives your listener the opportunity to digest and consider your point before you move on. However, pace can also be problematic as many entrepreneurs try to cheat on their elevator pitches by cramming 3 minutes of data into their 60 second pitch. Speaking too quickly reduces the quality of articulation and unlike pausing, it obfuscates the key messages the speaker is trying to convey.

Facial Expressions

Many people deliver their pitches while staring at their shoes, yet, facial expressions also clearly impact the effectiveness of an elevator pitch. I always recommend making direct eye contact, which I believe conveys seriousness and attentiveness. However, for some speakers (and even some listeners) eye contact can be uncomfortable. In this case, making direct eye contact only at key points can be another great way to emphasize them. Smiling can also be used for emphasis. While I also recommend an upbeat look throughout the elevator pitch, a quick smile during a pause after a key point is a great way to highlight it.

Body Language

Body language also plays a large role in non-verbal communication. Generally speaking, most people speak more clearly and confidently when standing rather than sitting. Standing also provides an opportunity for gesticulation which can add further emphasis to key points. However, fidgeting or standing rigidly with no movement at all can both be equally distracting.

Dress

There is no doubt that appearance plays a larger role in all first impressions. In Silicon Valley the definition of business casual is stretched pretty far and includes jeans at many companies. Many engineering departments are even more casual and I’ve met several clients in IT departments were shorts and t-shirts were the norm. I wouldn’t presume to be able to tell people what to where, but I do think that business casual attire is important to making a good first impression. Rightly or wrongly the investor you are approaching will judge you based on what you are wearing and shorts, sandals, t-shirts don’t give the impression of a c-level executive. It’s reasonable for an investor to assume that the way you approach him is the way you will approach a prospective client. Of course, if you meet the investor randomly at your favorite sandwich shop over the weekend all dress code bets are off.

Practicing

Most people don’t realize what they really sound or look like to others. Hence, rapid speakers, those who stare at their feet and fidgeters often don’t realize they have poor delivery. A good way to improve your voice delivery is to record it onto a cassette (or ipod) and listen to yourself, which allows you to focus only on the way your voice sounds. Practicing your pitch in front of the mirror us a good way to improve your facial expressions. Video recording can give you a good overall picture of your delivery and also insight into your body language. In fact, I remember the first time I watched myself deliver a pitch… it was very painful, but it ultimately helped me improve my delivery because I didn’t realize how much fidgeting I was doing and I highly recommend it. Furthermore, over the course of simply practicing your pitch you’ll become much more comfortable delivering it.

Great Elevator Pitches: What to Include

Elevator Pitch Series Table of Contents:

• Introduction
• 3 Key Lessons
• What to Include
• Delivery Matters
• Screwing Up My Elevator Pitch
• SVASE Presentation Slides
• 3 Additional Opinions

One of the reasons that so many entrepreneurs give poor elevator pitches is that they don't include the right material. Given the time constraints involved, I believe that it is very important to stick to an introduction, brief description of your product, the hook that makes your startup interesting and a closing call to action. If your product description is very brief you might consider adding one sentence at the end of your pitch on how you intend to use your capital. I've heard other people suggest including biz models, sales figures and secret sauce be included in an elevator pitch. While I agree that these are all very relevant pieces of information, I would only include them in your 60 second elevator pitch if they are your hook. For example, Salesforce.com being one of the first organizations to implement a "software as a service" business model would have been an interesting hook. However, using a SAAS business model today is not a good enough differentiator to be an effective hook. Lastly, entrepreneurs should be prepared for several standards questions from the investor after they conclude their elevator pitches.

Introduction

The first part of your elevator pitch should include your name, your role and your company's name. It is very tempting to give more background personal background but in 60 seconds your focus really needs to be on the product. Frankly, I don't advocate wasting any of your time trying to write a great into either. Try just adapting this simple line to your pitch:

My name is John Smith and I am the CEO of Acme Corporation.

Product Description

After introducing yourself and your company you need to tell the investor what you do. This is definitely the most critical and difficult part of the elevator pitch. As entrepreneurs we live and breathe our products 24 hours per day, which can often get our heads so deep into the trees that we can't see the forest. The person you are speaking to doesn't know as much about your product as you do and they may not even know much about the industry you hope to compete in. Thus, you must find a way to describe what you do that is understandable and compelling within the time constraints. Also, avoid using industry or technical jargon because this is a great way to confuse any listener. Unfortunately, there is no magic formula that I can offer on how best to capture the essence of your product in a few sentences. In fact, it is something that I still personally struggle with. The best advice that I can offer is to focus on how your product solves a business problem rather than a technical one. What is the value that your product delivers? How customers will use your product? Also, while I wouldn't advocate using this technique in a sales situation a good way to quickly get an investor to understand your product is to site your established competitors and then explain how and why your product is different. However, I would not suggest this approach if your competitors are not well known. If you can do it quickly using a personal example or metaphor can also be effective.

It is just plain difficult to know whether or not the description you've created is effective with out practicing it. I would try your pitch on at least 5-10 people that are neither technical nor in your industry. If they don't get your product, go back to the drawing board because no investor will interested in learning more about a company with a product that they don't understand.

Many entrepreneurs don't follow this guideline and wrongly believe that their product is so complex, unique or special that the average person, without any industry expertise, could never understand it. This is deadly for any elevator pitch (sales, recruiting, etc.) and especially problematic for entrepreneurs trying to raise capital. Suppose that you have a life sciences company and your ideal venture firm is InterWest. However, InterWest also focuses on IT and making an good impression on one of the IT focused partners is a great way to reach the life sciences team. Furthermore, many of venture partners have finance or consulting backgrounds and they may not be technically savvy. Thus, entrepreneurs who write pitches that are only discernible to industry experts really limit their opportunities. Lastly, in my own personal experience, I have received helpful introductions to investors from many unlikely sources. Creating an easy to understand product description pays many benefits because you never know who your Aunt Ethel dated in college or the person standing in line next to you at Starbucks is married to... especially in Silicon Valley.

The Hook

All great elevator pitches have a line that really grabs the attention of the listener. What is it that makes your startup so appealing that the investor would want to spend an hour discussing it with you? I suggest that for nearly all early-stage first-time entrepreneurs the hook should be some form of market validation. The best market validation is clearly booked sales revenue. Investors hear a lot of pitches from early-stage startups but very few of them have significant customer traction, so it is a great way to build credibility and really stand out. For many early-stage startups their products are still in development and revenue is months or years away. However, finding alpha and beta test partners is another great way to show demand for your product. While the test partners won't be paying for your product, there is a cost of their time and a risk associated with using and unfinished product so entering into a beta agreement is valid signal of customer traction. If you don't have a product that is even ready to be tested a letter of interest from a customer can be also form of market validation.

The best hook is definitely having a rock star management team but if you are a first-timer this is very unlikely. However, if you do have people on your team that have lead other startups to liquidity events or are recognized as leading experts in your industry by all means start dropping their names as your hook, but you do need to be sure that your team really is rock star material. Don't fool yourself into thinking that an expert in a tangential industry or a former director level executive constitutes a rock star.

Another interesting hook might be a new business model but careful to explain why your model will work because only a handful of new business models succeed each decade. A credible barrier to entry would also make a great hook.

There are also a few bad hooks that you should avoid. First and foremost don't use any hook that isn't true or even anything that isn't yet guaranteed. Lying really won't get you anywhere because the VC will catch you out during due-diligence. Referring to customers that haven't yet signed is also a really bad idea because it will become a strike against you if they don't sign on the dotted line... and for anyone who has never been in a sales role at least 50% of customers verbal commitments are never followed through on.

Sales projections are also bad hooks because every startup forecast leads to at least $50 million in sales by year five. Investors care more about your key assumptions than the actual sales projections and there is no way that in 60 seconds you could have explained what your assumptions are to the point that they even care what your projections look like.

Another bad hook is relying on a patent. Patents are granted relatively easily and very hard for startups to defend. In fact, some would say that startup software patents are virtually worthless. There may be some exceptions to this in industries like medical devices that I am less familiar with. Nonetheless, how is any cash-strapped startup going to defend a patent against a goliath like HP, Microsoft, Guidant or GE? Certainly no VCs want any of their capital to go towards patent litigation and patents will rarely make effective hooks.

The Close

Much like the introduction, the close is also pretty simple. You only need to state what stage of investment your company is at and how much capital you are seeking. Something simple like:

We are a seed stage company seeking $500K

is definitely sufficient. However, many entrepreneurs lose there audience at this point because their close doesn't match the rest of their pitch and they just don't realize what stage of investment their company is at. I'll try to address what milestones are commonly associated with the early stages of raising capital in a later post. In the meantime use this rule of thumb: if you don't have any sales, you are almost definitely a seed investment. While there may be some exceptions to this in life sciences or with web 2.0 investments where clinical trials or a user base will suffice, asking for $4M as a Series A is a big mistake because investors hate to argue with entrepreneurs about valuation and shifting from $4M down to $500K is a certainly going to be a point of conflict. If you've got a few seconds left you might want to through in a quick line about how you intend to spend the capital.

FAQ

After you finish your elevator pitch, interested investors will surely have questions for you. Many questions will be directed towards your product or solution and these will depend on the specifics of your business and the knowledge of the listener. However, I've listed several standard business questions that I believe all entrepreneurs should be prepared to answer after delivering their pitches:

• How do you make money and what is your business model?
• Who is your target customer?
• Why can't your competitors copy you?
• What are the barriers to entry?
• What's your secret sauce?
• How will you spend the money?
• Where is your breakeven point?
• What will your burn rate be?
• How many people will you hire?
  
• What type of liquidity event do you expect?

Tech Prediction Events Are Pointless

I attend a lot of entrepreneurial networking and technology events. This past month a recurring theme has been "What are the hot technologies for 2006." I must admit, I don't really understand the point or attraction to these types of events and sadly not only have there been many themed events on this topic, the question has also crept into many other events Q&A. I guess its an easy event to organize because it doesn't take much thought, they attract bluechip VC speakers and they sell out. That makes sense, but why exactly does anyone attend them? In my case, I'm an addict. I'll attend any event featuring an investor that I want to meet and I really can't help myself... but if I did have the choice, I'd stop attending these boring events and ban the predictions question from ever being asked at any event again.

Here's why I don't like predictions events.

First, what changed? Did hundreds of new companies get formed on January 1st to drive the need to make these predictions? A new year is really pretty insignificant from my perspective. As a startup, we don't take any holidays or have any revenue so new years is just a rough day to work through with a hang over. Its just an arbitrary date change.

Second, aren't these events designed to help entrepreneurs learn something? Even if I had been living in a blackhole and found the predictions to be new and interesting what am I learning? Will anyone shift their model or product focus because cleantech is hot? If we've got 4 of Silicon Valley's most famous VC's in a room cant we find something more compelling to talk about? Imagine the knowledge these guys could share with all of us eager entrepreneurs. Its kind of a shame.

Lastly, the predictions are too predictable. Web 2.0 is hot to some but others are predicting a bubble. Cleantech, Nanotech, and mobile applications are definitely hot and enterprise software is dead. Is there anything on this list that is surprising to anyone? Also, are these predictions any different from last year's? The Churchill Club managed to put on a good event (despite the food, which was terrible) but it was the individual panelists, and not the topic, that provided the entertainment. I hope that some day soon I can shake my addiction because I think I'm developing the entrepreneurs version of tinnitus from hearing the same VC predictions over and over again. I'd love to hear someone surprise me and say that SGI is making a comeback and IRIX is going to K.O. Linux. That would be interesting. All of this agreeing is boring.

Great Elevator Pitches: 3 Key Lessons

Elevator Pitch Series Table of Contents:

• Introduction
• 3 Key Lessons
• What to Include
• Delivery Matters
• Screwing Up My Elevator Pitch
• SVASE Presentation Slides
• 3 Additional Opinions

The elevator pitch literally gets is name from salespeople setting appointments while riding the elevator to and from work. In fact, I have a friend in New York who has gotten so good at this that he actually starts and ends his day by continuously riding up and down the elevators in his building from 8-9am and 5-6pm. He strikes a conversation with a prospect in the lobby, quickly introduces himself, explains his value proposition, exchanges contact details and agrees to set an appointment before he walks out of the elevator! The key to his success is that he can explain why the prospect should meet with him in a simple and compelling manner in 45 seconds because he knows preciesely the time it takes to get from top of his building the the bottom and the prospect certainly is not going to be late for either work or dinner with his family in order to speak with a sales guy in the elevator.

The first lesson you can learn from my friend is to keep your message simple and concise. Your goal is to set an appointment where you can discuss the opportunity in greater detail, but you don’t have time for all of the details now. Include only the most important aspects of your business because while you may not be riding in an elevator, you are dealing with the other person’s attention span. Does the investor your speaking with understand or care about the technical details? The investor certainly doesn't care about them until after s/he understands the problem you solve. So a great elevator pitch explains the problem your company solves in terms of its business value, without the technical details, in 60 seconds or less. 60 seconds may not seem like a long time but countless advertising industry studies show that average attention spans are only 30 seconds. Hence, TV and radio commercials are only 30 seconds long. My friend gives his elevator pitch in 45 seconds, and 60 seconds is definitely the maximum amount of time you have to get your point across.

The second lesson you can learn from this salesman is to cheat. Elevator pitches are supposed to be spontaneous, but his elevator pitches are carefully planned. He knows that he is going to meet people in the elevator every day, he has rehearsed his pitch thousands of times and he knows it cold. In order to deliver a great elevator pitch my friend cheated by starting the test early you should also. You may never ride in an elevator with a venture capitalist, but you will meet people that can help you build your business every day and if you live in Silicon Valley you’ll definitely bump into a venture capitalist sooner rather than later. However, unless you’re truly stalking your favorite VC, your elevator pitch is likely to be somewhat spontaneous, so when you bump into him or her at the Dutch Goose or Buck’s, you’d better seize the opportunity. Cheat by being prepared. Write and memorize your elevator pitch now so that can make the most of your opportunities whenever they arise. Furthermore, I suggest taking your own destiny a bit more into your own hands, by seeking out VCs at local entrepreneur networking events where they frequently appear as guest speakers. (A list of these groups in the Silicon Valley can be found in a previous posting here) Yet, many eager entrepreneurs approach investors at these events so it’s even more important to make your pitch really standout in order to get your executive summary read the following day. So arguably a great elevator pitch does take longer than 60 seconds and it probably should start now.

The third lesson that can be taken from this successful salesman is that he doesn’t waste his prospect's time with his own bio. The prospect buys from my friend because he can explain the value of his product and not because he is the North East senior named account manager, who has won the president's choice award 3 times and got a great score on the GMAT. The prospect doesn't care as much about my friend's GMAT score as he does and both of their time is better spent talking about the product. This is the easiest way that entrepreneurs can distinguish themselves from other inneffective elevator pitches. Countless entrepreneurs burn their 60 seconds introducing themselves and wind up losing their audience before they ever explain the problem they solve. While the management team is often cited as one of the key criteria of venture investing, the elevator pitch simply isn’t the place to elaborate on this point. You’ve got 60 seconds and you’re guaranteed to use 10 just saying your name and that you’re the CEO, COO, CTO, CXO, etc. At some point your bio will come up anyway so let the investor ask you for it. I suggest using the next 50 seconds to explain your business because there are a lot more former middle managers from corporate America giving bad elevator pitches than there are fundable startups. The one exception to this is if you really are a rock star CEO. I would define a rock star CEO as either someone who as already led a startup to a successful liquidity event or someone who is widely acknowledge as the leading expert on a key issue facing the industry their startup is about to enter. A rock star CEO in your management team is a great “hook” (more on this later) and it is absolutely worth elaborating on. Otherwise, your name and title is plenty for you elevator pitch.

In closing this post, I’ll admit that even the perfect elevator pitch won’t set a meeting on its own. However, after you’ve delivered your pitch, the rest is up to the investor. Inevitably, the investor will have questions for you, so think of your elevator pitch as a table of contents rather than the entire book. The key to distilling your entire business into 60 seconds or less is giving the investor only the titles of the critical chapters in your story and then letting them decide which they want to learn more about. This allows you to create a meaningful dialogue in 3-5 minutes and will greatly increase the chances of getting either to a quick “no” or your executive summary read and an appointment set. Additionally, the questions asked provide clues on what you need to demonstrate to the investor when you do get to present your slide deck.

Great Elevator Pitches: Intro

Elevator Pitch Series Table of Contents:

• Introduction
• 3 Key Lessons
• What to Include
• Delivery Matters
• Screwing Up My Elevator Pitch
• SVASE Presentation Slides
• 3 Additional Opinions

Over the last 18 months I’ve attended numerous VC breakfast clubs, founders' brown bag lunches, cocktail receptions and keynote speaker dinners that I think I must have gained 30 pounds. Over the course of these events I have met hundreds of other entrepreneurs looking to grow and fund their businesses. However, of this group, I can only tell you what a handful of these entrepreneurs actually do. Unfortunately most entrepreneurs just don’t know how to explain what their business does in any type of succinct or effective manner. This is at least partially due to the fact that most founders come from technical backgrounds rather than sales or marketing but I’ve heard many sales guys give terrible elevator pitches also. The bottom line is that it is very difficult to distill the essence of an entire company into a compelling 60 second message that anyone can understand. 18 months ago I could barely explain what Cryptine Networks does in 60 minutes, let alone 60 seconds. Thus, this series of blog entries is an attempt to explain how I’ve learned to build a great elevator pitch.

Elevator pitches are used to explain what your company does to investors, sales prospects, potential employees, for general networking or simply when your friends and relatives ask why you’ve been working in your garage for 18 months with out a paycheck. The goal of an elevator pitch to a customer is to perk the listener’s interest enough to set a formal appointment for further discussion. The goal of an elevator pitch to a potential employee is to kindle a passion for your product. The goal of an elevator pitch for general networking is to ensure that the other person leaves with you key message so that 6 months later, when they guy your speaking to now finds himself in another conversation with a potential investor or customer who could benefit form your solution he remembers to refer them to you. The goal of an elevator pitch to a family member is to convince your wife not to leave you, you parents to keep supporting you and your uncle to introduce you to that angel investor he claims to know. Thus, the elevator pitch is one of the most valuable tools an entrepreneur has and it can be used in many contexts. However, for the rest of this series the context will be that of an entrepreneur attempting to raise capital.

Are Great Entrepreneurs Stubborn?

There is a notion floating around the Silicon Valley startup community that successful entrepreneurs are stubborn. The belief is that during the process of building a great company an entrepreneur will face advisors, VCs, customers, team members and general adversity that will all pull him/her in different directions but successful entrepreneurs persevere to stay the course and it is their fundamental stubbornness that allows them to do this. However, I believe that few startups stick rigidly to any plan from idea through liquidity event and the focus on stubbornness as the differentiator between failure and greatness is misguided. Sadly, this myth’s popularity is in part due to its appeal. It is often easier for entrepreneurs to site their stubbornness than it is address a real need for change.

Some would argue that the need for stubbornness is greatest at the early stages because the lack of market validation means the startup plans are least proven and therefore open to the most criticism. However, in the early stages, it is most critical for the startup to at least steer in the right direction and considering the feed back from others is best (and only?) way to objectively sharpen a strategy.

More recently, I’ve heard several sharp people explain that entrepreneurs need to be stubborn, but if they hear the same objections 10 times over, it is probably time to change. This is of course good advice, but I don’t think it squarely hits the nail on the head.

Entrepreneurs do need to have a vision and they need to persevere through adversity to build a great company. However, entrepreneurs need to be able to adapt their visions to market conditions. Few entrepreneurs, other than say Steve Jobs, can build a truly great vision in isolation. So the key is not stubbornness but knowing when to adapt and incorporate. Thus, I believe the key to great entrepreneurship is really knowledge and understanding that transcends both a business problem and technology in order to provide a true solution. Hence, entrepreneurs should focus their time on building deep knowledge of their markets in order to understand when to adapt and when to persevere.

I believe the most successful entrepreneurs are likely also to be the best listeners. Understanding when to adapt is partially related to who’s objection the entrepreneur is considering. Customers will always provide the best advice on the problem and VCs will generally provide the best advice regarding the market opportunity and business model. The entrepreneurs job is take in as much data as possible in order to create a vision that leverages their technology to provide a true solution for the customer that is delivered through a repeatable business model.

The worst case scenario is for an entrepreneur write-off any criticism because the objection comes from someone who doesn’t “get it.” Dealing with the objections of advisors, VCs, customers and team members is the best way to improve a business through market driven feedback. An entrepreneur may decide that particular objection isn’t valid but the best entrepreneurs can explain why they disagree and stubbornness should never be a factor in significant business decisions. Thus, it is the abilities to listen, consider and debate, rather than stubbornness, that allow the entrepreneur to refine knowledge into the wisdom from which all great visions are created.

Setting VC Meetings: Conclusions

In conclusion, VCs doors are much more open to entrepreneurs than most realize. I’m confident that with a good elevator pitch and executive summary any entrepreneur can set appointments with the appropriate investors by attending entrepreneurship community events, leveraging their service provider relationships and using LinkedIn. At Cryptine Networks, I have successfully deployed all of the methods described in this series of postings. If none of them work for you, it may be sign of a weakness in your business or possibly that your proposal simply isn’t fundable.

If you can't set any meetings after several months, this is a significant data point and I suggest takeing a step back and attempting to consider what would make your business fundable. The short answer is that most VCs are looking for a 10X return on the money the invest within 5-7 years. Thus, VCs look for home runs, not singles and they can't invest in features that are not stand alone businesses. Also, it is virtually unheard of for VCs to invest in services businesses because they don't scale quickly enough to provide the necessary IRR. In the future I will attempt to write more on what makes a business fundable, but in the mean time, Tim Oren has written a good post that can be found here.

Did I miss any good ideas on how to set appointments with investors? If so, please let me know because I’d love to share them with the rest of the entrepreneur community.

Setting VC Meetings: Leveraging Your Relationships

A personal connection is great, but the best way to get a qualified introduction to a VC is through your service providers. Lawyers, bankers and startup consultants all will help make introductions to investors on behalf of their clients. I have also heard others recommend that startups look to their accountants for investor introductions but I don’t have any personal experience with this. The bottom line is that anyone that wants to do business with you has in interest in getting you funded. Furthermore, LinkedIn and other social networking websites can be very helpful in getting an investors attention.

Corporate law firms are definitely a startups best source of investor introductions. Many entrepreneurs make the mistake of using an individual lawyer to save money. However, most of the top Silicon Valley law firms like Gunderson Dettmer, Fenwick & West, Wilson Sonsini, Heller Erhman and DLA Piper Rudnick have deep connections within the venture capital industry and will actually defer their fees until after the startup receives its funding. Thus, by working with one of these law firms the entrepreneur creates a partner that, through deferred fees, has an interest getting them funded. (I am happy to help make introductions to any one looking for a good corporate attorney.)

In the bay area there are also two banks that regularly help startups set appointments with investors. Silicon Valley Bank and Bridge Bank are definitely the banks for startups. There are no minimum balances required and both banks are creative in their financing practices to help startups. Furthermore, the individual bankers regularly introduce their clients to the investors in their personal networks and Silicon Valley Bank also holds regular breakfast club events where entrepreneurs can meet VCs.

Many startups also hire investment agents/consultants to help them find capital. While the value of these startup consultants has been widely debated in other blogs, it is clear that the best consultants do introduce their clients to investors. One such great consultant is Technology Ventures Corporation (TVC). While many startup consultants charge their clients, TVC is federally funded and doesn’t cost a thing. I am currently working with a TVC consultant and I have nothing but praise for him and his organization. I recently sat down with my TVC consultant and mapped approximately 10 VCs (who all meet the criteria described above for Cryptine Networks) that he can help introduce me to.

Social Networking is a hybrid between a personal connection and an introduction. The best way to describe it is as encouraging your own introduction. LinkedIn is clearly the best site for business networking with the venture community. Doostang (invite only) and Ryze are also worth investigating but I’ve only used these sites sparingly. LinkedIn’s people search with the term “venture capital” will produce many results for most people. However, using LinkedIn effectively does require attention to detail. Entrepreneurs should always attempt to network first through their 1st degree connections that they know best. However, when this is not possible, the golden rule is that the less you know the contact the more targeted and carefully explained your LinkedIn request needs to be. A well written networking request makes all the difference in the world between someone who you met once at the Churchill Club 6 months ago forwarding it on or declining the request.

Setting VC Meetings: Making Personal Connections

After creating a snappy elevator pitch and convincing executive summary, the easiest way to create a personal connection with investors is by becoming a part of the local entrepreneurship community. Several Bay Area organizations including Technology Ventures Corporation, SVASE, SDForum, eBig, BASN, VC TaskForce, the Churchill Club and TiE hold events on a regular basis (usually 3-4 in any given week) that feature VCs and angels as speakers. Investors attend these events specifically to stay active and meet entrepreneurs. So polish your elevator pitch and introduce yourself before or after the event. If the investor shows interest, be sure to follow up the next day with an executive summary. Furthermore, some of the events held by these organizations are designed specifically to give entrepreneurs the opportunity to pitch directly to VCs. Entrepreneurs can easily meet 10-15 different VCs or angels per month by becoming apart of the local startup community… oh and you just might learn something about improving your business at these events too. ;)

A second way to create a personal connection to an investor is to read and comment on their blog. Brad Feld, Will Price, Tim Oren, David Hornik, David Cowan, Guy Kawasaki and Peter Rip all have excellent blogs. There are dozens more VCs blogging and many of them respond quickly to comments. Blogs are a great way to get to know investors and knowing investors is what gets an entrepreneur's executive summary read.

Setting VC Meetings: The Neccesary Tools

Building an elevator pitch and executive summary are vital to securing an appointment with any investor. A detailed explanation of either tool is beyond the scope of this blog entry. However, Bill Reichart of Garage Technology Ventures has written a good paper on executive summaries that can be found here and I've helped SVASE organize an event about writing elevator pitches that will take place on February 10^th.

The elevator pitch is a 60 second introduction to your business that is used to peak someone’s curiosity. In 60 seconds a good elevator pitch tells an investor what you do for the company (but not your bio, which is important but can wait), what problem you solve, what market validation you have, how much capital you are seeking and at what stage of investment. This is gives the investor enough information to start asking questions and may lead to a request for your executive summary. The executive summary is typically a 1 page document that includes more detail on the problem, solution, market, competition, team, business model, milestones and financial projections.

Setting VC Meetings: Introduction

In Silicon Valley there are many myths about venture capital. One such myth is the ease with which money can be raised from the venture capitalists. This myth has been feuled by a small number of well publicized poor investments that were made during the Internet bubble and the perception of irrational herding behavior among investors around "hot" technology. I believe the myth of easy money on Sand Hill Road is further propelled by industry outsiders who've never actually tried to raise money. My own experience suggests that, with the exception of rock star CEOs, the process of raising capital is difficult. In fact, for many first time entrepreneurs (like myself), just getting a meeting with an investor can be a challenge and few entrepreneurs have the networks required to set multiple appointments. This blog series is an attempt to share how I’ve been able to build the network that I am now leveraging successfully to set appointment with investors.

In setting appointments there are two primary challenges. The first problem is providing the investors with compelling material that convinces them to sit down with you. The second more difficult problem is getting the investors to read it. The tools that an entrepreneur needs to set an appointment with an investor are the elevator pitch and the executive summary. Getting the investor to read or listen to the material is really only accomplished by making a personal connection or getting an introduction. Both of these problems are exacerbated by attempting to contact inappropriate investors. Entrepreneurs should ensure that the investors they approach meet these three criteria before attempting to set any meetings. First make sure the investor invests in your industry. For example Hummer Winblad is a software investor and they do not invest in chips or biotech. Second, make sure the investor invests at your stage. LeapFrog Ventures is an early stage investor and they don't particpate in series C financing rounds. Lastly and most importantly, make sure that the investor you are approaching does not have any competitive investments. Ethical investors won't meet with companies that are competitive with their current portfolio companies. However, less ethical investors will gladly meet with you and then share your business plan and secret sauce with their portfolio companies.

First and foremost, setting appointments with investors is more about networking and less about having a great product. Ultimately, you will need a great product to get funded but I have been told that last year zero companies were funded by VCs without an introduction or personal connection. That means that submitting a summary or business plan via a VC’s website is virtually worthless. Privately numerous VCs attest to this. Rather than bemoaning the 'old boys club', I suggest that entrepreneurs accept that they are going to have to dedicate several hours per week to setting appointments. If you need money to grow your business, not even the best products will get funded if no VCs are talking to you.