A small number of venture capitalists (VCs) will let you know as a matter of course what to expect from your first meeting.
The Capital Fund, run by London Fund Managers, is onesuch group, and they provide amazingly detailed guidance for entrepreneurs. More normally you won’t get that, and you should certainly feel free to ask your contact what the format will be.
Venture capitalists look first and foremost for a great management team. Without one, they won’t invest; with one, they just might. So if your business plan has persuaded one or more VCs to invite you in for a meeting (first meetings almost always take place at the VC’s office), you really need to convince them about the strength of your management team.
It’s one thing to write well and look good on paper, but VCs know that business plans can be – and often are – written by consultants trained to write good business plans, so it’s only in person that they can really get a sense of you and your team, and decide whether they want to invest in you.
THE FIRST MEETING
The first meeting will sometimes be a relaxed discussion about your plan and your business, but more often will involve you making a formal presentation to the VC. There will usually be two or three of the investor’s people attending the meeting. Sometimes you’ll be left alone to go right the way through the presentation without interruptions, but more normally you will get the odd question thrown at you during it. Either way, you should expect some probing questions at the end, so be prepared for them.
Personalities obviously vary enormously, but many entrepreneurs are intimidated a bit by the experience, especially given how important it usually is to the business raising the capital, so the more you know in advance the better. Typically VCs are smart, self confident people, usually with an accountancy or legal background. They invariably dress in smart, formal suits, and have smart offices. Their language will frequently use financial jargon (‘burn rate’, which is how much cash you currently need each month, or ‘EBITDA’, earnings before interest, depreciation and amortisation, being typical examples). Entrepreneurs frequently don’t match that description, and can therefore find it a bit off-putting.
Just relax, and you’ll be fine. Remember that your business could make these people serious money, and that you could take the opportunity to another investor if you don’t like this one. It’s important that you appear self-confident, and in no way desperate. (If you are desperate for the cash, you’re far less likely to secure it, so try as hard as you can not to show it even if you are.) In reality, it’s probably true that you could go to others anyway – if one VC is willing to invest, there are almost certainly others who would be also, since they all tend to use very similar criteria.
First impressions count, so make sure you’re there on time, and dress well (it might seem old-fashioned, but these things really do count). What does ‘dress well’ mean? Of course investors vary, but as a norm it certainly does not need to mean a suit and tie, if that’s not your usual style. I think most investors would be surprised to see an entrepreneur looking scruffy (if you’re not willing to make a little effort for this meeting, what does that say about your ability to win sales with clients?) but these days most VCs wouldn’t bat an eyelid if someone is smart but not in a suit. It’s important that they get to know who you are, as a person.
At this meeting it is probably best to make your presentation a summary of the business plan. Remember that your goal is to persuade investors to buy into your business, rather than persuading customers to buy your product or service. Focus, therefore, on the business opportunity rather than the advantages of your product. [For more tips on the presentation, see First Meeting Tips, left].
Remember, as with any presentation, that your audience will only retain a tiny fraction of what you say, so pick the most important points and repeat them when applicable. Also make sure you have a printed copy of the whole presentation available to distribute afterwards.
Should you use PowerPoint or an equivalent? There are no rules, and each investment house will have their own expectations. Some will want to see visual aids. For others, such as Mark Wignall, chief executive of the newly formed Matrix Private Equity Partners, PowerPoint is a real turn-off. It’s well worth asking the investor beforehand.
What will always go down well, is evidence of research and planning. “Without being too theatrical, rehearse what you’re going to say,” says Wignall. “Understand what you’re trying to get out of the investment and work as a team to convince. If the management team can’t work together to create a decent presentation then this is hardly a sign of good things to come.” It works well, too, if you can tailor what you’re saying to the VC, and show an understanding and appreciation of their track record and investment criteria.
At First Stage Capital, initial meetings with chief executive Jason Purcell last for an hour and allow potential investees equal time for a presentation and then for relevant questions. “I would recommend compiling a presentation for 30 minutes, highlighting key points, and leaving the remainder of the time free to answer questions.”
When it comes to the question-and-answer section of the meeting, you should try to anticipate the questions you’re likely to be asked, and prepare answers. Make sure you have information to hand to back up your response, rather than scrabbling about for bits of paper, and show that the issue at hand is something you have already considered.
MOVING FORWARD
