17 Jan How to pitch a pre-seed investor
The burning question on all entrepreneurs’ lips, Sandile Shabangu of Startup Mzansi Foundation reveals how to successfully raise money for your start-up…
As an investor supporting Applied AI, ecommerce and marketplace business at pre-seed and seed stage I see a lot of pitches, which is part of the job that I really enjoy – particularly when an entrepreneur gets it right.
What sets great pitches apart are those which feature well thought through plans for big markets, presented with passion and humility.
Entrepreneurs often ask me about how they can pitch more effectively and avoid dropping the ball when it comes to engaging VCs. Whilst there aren’t any set rules and each investor will be different, there are definitely factors which can set an entrepreneur apart from the crowd and demonstrate that they’re a dynamic operator.
First impressions count and I always advise founders to think carefully about how they approach VCs before diving in.
A key focus here is avoiding a cold approach, which although communicating your core message, will also land you in an inbox alongside many other people doing the same thing.
Instead, it’s worth considering whether there’s a way of fostering a more personal first connection. Do you share a contact who may be able to facilitate a warmer or more organic introduction? Or can you attend a networking event which will allow you to introduce your business face to face?
If neither of the above seems right it may be worth considering a slightly different approach. Some of the most impressive first encounters with entrepreneurs are email approaches which don’t pitch at all, well not at first at least.
These types of approaches first engage on an interesting industry debate or sometimes offer insight on an issue or challenge that I’ve mentioned on social media. Only after a conversation regarding our common ground has been struck up, does the pitch come, which is a really smart way of creating chemistry and differentiating yourself.
Be prepared and practice
It’s obviously important to make the most of each opportunity as there are a fairly limited number of relevant VCs operating at pre-seed and seed and it’s a very small and close ecosystem. Come prepared with a strong presentation showing that you have thought through the fundamentals.
Know the detail of your business and have a clear view on how you will get those listening as excited about it as you are. Be crystal clear on the story of your business and why you think the world needs your product.
Practice telling it so that you can identify any areas which don’t work or sound clumsy and get familiar at telling your story well. Make sure you are well versed on the finer detail surrounding your business to bring credibility and weight to what you’re saying.
Know what you’re asking for
Have a clear view on the amount you want an investor to commit. The amount that is right for your company should be a figure which will take you six months past your next financial milestone, base your calculations on that and stick to it.
Steer clear of pitching the amount that you think fits the investment size of the VC you’re talking to. This is likely to result in you looking bad or worse, your company will end up with the wrong plan and the wrong amount of money.
Once you’ve pitched, give the investor time to digest your proposal and come back to you in their own time. Don’t let your keenness to progress turn you into an email spammer.
The daily calendar of a VC team is often hectic and it can take a varying amount of time to get all decision makers around the table to agree on the next steps for a potential investment.
Allow a week or so to pass and send a quick note rather than calling – the ball is then firmly in their court.
Demonstrate your passion, take a considered approach and show that you are driven and hungry to build a large-scale enterprise. Most of all prove that you’re in it for the long haul and are prepared to commit the significant time and energy it will take.
Sandile Shabangu is founder and managing partner of Startup Mzansi, one of the SA’s leading early-stage investors in start-ups. For more blogs and advice from him, follow his website at www.startupguy.co.za