June 27, 2017

Two Cents: The Art of Pitching a Corporate Venture Capital Firm

This post originally appeared on LinkedIn Pulse on June 23, 2017. 

As a corporate venture capitalist, I can’t tell you how many times I have heard the same story from founders. They believe they had a great meeting with XYZ Corporation and that they secured interest in their product/service or a partnership. Dialogue that follows is usually something to the effect of: “clearly I should be interested too if XYZ and their venture arm is interested” or “I better act fast if I want to beat out XYZ.” Sometimes, they tell me they had a fantastic meeting with our larger organization’s product team or business unit - which they say means I should want to invest. While those comments may seem reasonable, they can often come off as boastful noise which distracts from the merits of the startup in question.

For my second installment of ‘Two Cents,’ I wanted to focus on startups’ interactions with CVC firms and the most common mistakes I see during the initial pitch:

  • Applying the 'used car salesman' approach to pitching: It’s almost impossible to convince any VC to make an “impulse investment,” especially when a thorough due diligence and approval process is required for any deal. Founders who think this is a successful approach are actually showing investors how little they know about the process and simply come off unprofessional. Pitching an investor is similar to pitching a prospective customer, especially for enterprise focused companies. This is not to mention that the approach is a bit insulting, as it implies that their excitement about the investment opportunity should be influenced by XYZ’s actions, as if they are unable to decipher the merits for themselves or that we should be following the leader. Said differently, what founder wants their startup to draw any resemblance or feel to that of a used car? It’s much better to be thoughtful and not overly aggressive when it comes to pitching a potential investor (Click to Tweet).

  • Not being grounded in the reality of the investment process: As most investors and entrepreneurs know, a client isn’t a client until they sign on the dotted line (Click to Tweet). Delivering bad news isn’t easy, especially when faced with a passionate entrepreneur who is pitching their “baby.” As such, many choose not to give a quick and decisive “no,” but rather a “maybe” and hope the dialog just fizzles away with time. All the while an eager entrepreneur may get their hopes up. A telltale sign that an investor isn't interested in your business idea or product is if you walk away from your meeting without clear next steps. Even if you do have very clear next steps, you still shouldn’t count your chickens yet, as a company’s budget, direction, priorities, among other factors, may change, preventing the prospective client from signing on the dotted line. While it is certainly fine to have high hopes after a pitch, you also need to be realistic in your thinking, especially when pitching an investor. The last thing you want is for the investor to follow up on a potential deal during the latter stages of their diligence process, only to learn that what you thought was a “sure thing” fell through. As an investor, I like to give companies quick feedback listing next steps or my reservations, which provides the founders an opportunity to address my concerns. As I mentioned, a quick yes is not typical with investments.

  • Getting ahead of one's self: At Verizon, the product team and business units speak to startups on a regular basis, many of which are as a result of introductions from Verizon Ventures. Whether we were the conduit for a relationship or not, we are always excited to see our internal teams engaging with the startup community. With technological change happening at an astonishing rate, we have found that startups are a great medium for keeping pace with new innovations. Therefore if our internal teams didn’t interface with the startup community, they would always be behind the curve (Click to Tweet). Verizon Ventures is a highly strategic corporate venture capital firm and we aim to be very much in sync with the wants and needs of our product teams and business units. If there ever was a case in which we came across a startup that interfaced with one of our internal teams that we weren’t aware of, it only takes an email or phone call to understand the nature and significance of that relationship. With that being said, even if a startup had a commercial agreement with one of our internal teams, it doesn’t make that startup an automatic candidate for Verizon Ventures’ investment. While Verizon corporate may be working with a startup that solves a very specific need, the ventures arm might see issues that prevent us from an investing relationship. As an example, concerns about its addressable market could severely impact our decision to invest.

In conclusion, boasting about the number of sales pitches you had and favorably handicapping how many of them will convert to paying clients may be hurting, not helping, your chance to raise capital. The more aggressive a founder is, the more they are taking attention away from what matters - their startup (Click to Tweet). In addition, implying an investor should take action because a third party already did or is likely to is not the most classy way to start off the pitch. I recommend focusing on your value proposition and then transition into your accomplishments, your near and short-term goals and how you plan to get there. In the end, results are the only thing that matters and everything else is just noise.

Tags: Alden Mahabir , investing , Startups , Two Cents , CVC