How to Get Venture Funding, page 18

Size of Opportunity

Every VC wants to invest in a business that is a huge opportunity. No VC wants to knowingly invest in a business in a small, dead-end niche.

Your job is to explain why your business is part of a huge opportunity. It’s important to back that up with metrics as much as possible.

You should also be able to justify a large share of this opportunity for your particular business. In other words, the winning approach is, “This is a huge, untapped market, and here’s why we can capture the lion’s share of it.”

Product

Of course, you must be very familiar with your product. If at all possible, you should bring the product and demonstrate it to the VCs (or demo it over the Internet if appropriate).

However, this may be dangerous if your product is not complete or has not been fully tested. While failures in this situation are common, don’t let it happen to you in a VC pitch. If your product isn’t ready for prime time, don’t demo it—but do arrange for some kind of simulation so that the VCs can get a hands-on sense of what you are doing. Many great companies have been started using pitches that relied on “demo ware.”

It’s important that you be able to describe in plain English what your product does. It’s likely the VCs have less technical depth than you do. It’s always OK to refer technical questions to your technologists (if you are not one). It is never helpful to be confused about what your product is and what it does.

Customers

VCs always want to know if “the dogs will eat the dog food.” Can you get customers to buy your product? Who are your customers? What will your product do for them? What are the value propositions from the customer’s viewpoint? What is the customer pain that your problem will solve? What enhancements or changes have customers asked for?

How much does it cost you to acquire a customer? What is the average amount of time you can expect to keep that customer? What’s the most effective customer acquisition strategy?

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