What Do VCs Want? VC Experts Tell It Like It is –

By Brenda Besdansky

The Venture Capital community is definitely more conservative that in the glory years of the late 1990s, when a 10-page PowerPoint presentation was sometimes enough to get a multi-million dollar cash infusion. Today, we are back to the basics — a solid pitch, a good plan, and a strong team. In my work with entrepreneurs and VCs, I have found some very consistent themes: What do the VC’s want to hear when you present to them?

1. Strong management team
2. ROI
3. Solid business plan
4. Competition
5. Product concept and execution
6. Previous funding

I interviewed two well-known VCs, Aaron Gershenberg, Vice President, and Doug Hamilton, Managing Director of Silicon Valley Bank’s Venture Capital Group, to find out why this Top Six list was important — to potential investors, and therefore to you, the entrepreneur.

Brenda: Let’s start with the big, broad question entrepreneurs always ask—What do VCs want?

Aaron: Brenda, it depends. When I meet with an entrepreneur, I ask myself Is this someone who can execute a business plan? Is this a person who is going to make fatal flawed judgments about markets, or technology or opportunities?

Doug: I want to make sure that the entrepreneur is well organized in his business plan and is able to convey his message well. If he is able to give the 30,000-foot aerial view of the company within one or two sentences, that’s a good start.

Brenda: So, it’s not just the message that you are looking for, but how the entrepreneur can articulate that message in a clear, concise way. You want something you can listen to and get excited about.

Aaron: That’s right! I’m looking for someone who has tremendous knowledge of an industry because they’ve worked in it. I want to listen to someone who can speak clearly about the competition, the technology all of the key things that are addressed in any book on how to write a business plan. I’ll listen to someone who can communicate that effectively with energy and enthusiasm.

Brenda: That’s a good point, Aaron. That kind of enthusiasm translates into a passion. It’s an ability to express excitement about what one does. But, how does an entrepreneur get this kind of energy and excitement across in the short time slots that are often allotted for pitches.

Aaron: Yeah, if they give you five minutes you should do your presentation in four. Or, if they give you ten you should do it in eight. When you are trying to communicate an idea and get some excitement behind that idea, the most important thing is not spending a whole lot of time trying to educate people with details. It’s best to allow for a dynamic situation rather than a one-way presentation. Providing information in almost lecture format is the wrong way to go. You should be very large and very much focused on how big the opportunity is. Try to stay away from details.

Brenda: So true. Details often bog things down. I always ask my clients to practice tightening their presentations to avoid this pitfall. I remind them that they need to be prepared to give the “elevator pitch” at any time. An elevator pitch should go from about 30 seconds to one minute, and certainly no more than two minutes. In most situations, an entrepreneur needs to make points quickly. There are two ways to get good at this. Get a coach who will put you through your paces before you go out there, or, get into a couple of situations that are low risk and use those situations as dry runs or dress rehearsals.

Doug: I agree. My advice is to practice with as many potential investors, maybe your third or fourth choice investors, to get smart before you go after your first choice investors. Get as many of the questions thought through and addressed early on and then develop great answers for them.

Aaron: Also, do this with the management team. Get one or two people in the company to initially play devil’s advocate to make sure that they have answered the 25 toughest questions.

Brenda: So, what final words do you two have for entrepreneurs who are going out to present their ideas to VCs?

Doug: If a VC is going to invest in a company, they’re going to expect that company to go raise money elsewhere. They’ll very much be looking at style. They’ll expect that person to be able to go out and sign strategic partnerships. There is a big complement of just good old-fashioned selling, and that selling is establishing rapport. So style is extremely important.

Aaron: Exactly. I mean looking the person in the eye and making sure that there’s a connection there is really just kind of fundamental. It’s engagement in conversation. If you don’t have the fundamentals down, boy, you really need a lot of coaching.