Ever wished you could pick the brain of a business owner who’s already secured venture capital for their company? If so, you’re in luck: for today’s post, we talked to two company founders about how they won over investors.
Krista Morgan is the
CEO of marketplace lender P2Binvestor
David Bitton is
(@practicepanther), which provides case management software for lawyers worldwide. Their experience can give you insight about what it will take to win venture capital for your tech startup.
The transcript below has been lightly edited for length and clarity.
In your experience, what details do investors pay attention to in a pitch?
Morgan: There are three things I see investors focusing on:
- Traction. They want to know what progress you're making without their money. Revenue is the best traction metric, but show what you have, whether that's users, beta sign-ups, or qualitative feedback.
- Cash runway. Be prepared to talk about how far this cash gets you and what your plan is to raise more cash as needed.
- Team, team, team. A lot of people want to know who else on my team has startup experience and will help bridge the gaps in my own experience and knowledge.
Bitton: We found it successful to bring up our past experience in the industry, such as how our previous company grew and that it was sold. We showed them we are following the same trajectory and business plan and just replicating our success. They were particularly interested in the background and experience of our founding team and managers in the company.
What strategies helped you pitch to VC investors?
Morgan: The number-one thing you can easily do is practice your pitch.
A polished pitch goes a long way toward winning over potential investors – Krista Morgan, CEO of P2Binvestor
I don't have the nicest or coolest slides, and there are always things in my pitch that can be improved, but my delivery is always extremely polished. Investors will forgive a lot of things if you deliver a clear, concise, and smart pitch. Knowing your pitch cold means you have time to make eye contact, move around, and engage your audience. It gives investors confidence that you know what you're doing.
Is there a difference in your approach to VCs vs. angel investors? Which investors did you go after?
Morgan: I find angel investors are more about the big picture and the team. They're usually not experts in your space and aren't going to delve into the details. VCs are ideally well versed in your space and therefore are going to ask a lot more detailed questions about your go-to market strategy, value proposition, and the unit economics of your business model.
Bitton: We went after investors who invested with us in previous ventures and any investors that were somehow connected to previous investors or our network. It was much easier the second time around since we'd proven ourselves before and were already showing drastic growth, revenue, and profitability.
Why did you decide to raise external capital?
Turn to external capital if you want rapid growth in a short time period. – David Bitton, CEO of Practice Panther
Bitton: We raised money externally for one very important reason. We wanted to grow exponentially faster. We didn't want gradual growth over four years. We wanted rapid growth over one year. We needed the capital, resources, knowledge, and manpower to expand to international markets.
We were surprised by how many people were begging to invest in our latest project. We had to turn down a lot of people, many who were family and friends. It's always a good feeling to have too many options, but a bad feeling to turn down people closest to you. Raise money from outside investors without any personal ties – it's usually better to keep family and business separate.
Looking for more startup funding advice? Check out pointers straight from the source in “Investor Group Alliance of Angels: What We Look for in an IT Startup.”