Raising funds is a complex mission. At Elveo we provide investors a tool to analyse startup potential. We look at entrepreneur behaviours to measure team fit and entrepreneurial potential (discover more here).
In this journey we’ve met many VCs in the last year and analysed their behaviours as well.
This guide is the result of our observation of how VCs behaviours impact their decision.
Convince investors by precisely understanding their personalities and decision making process.
- 📝 Discover VC fears and be able to reassure them
- 👩🏻🎤 Get to know 4 VC personalities and adapt your pitch to each
- 🕵🏻♀️ Answer VC needs by understanding what they look for when they invest
- ⚡️ What to say and what to avoid saying
- ✍🏽 Write a cold email that VCs will be excited to open
- 📜 Build the pitch deck that drive success (with examples)
📝 Speak the VC language
Most investors have different personalities than founder. Adapt your communication to what they want.
This difference between founders and VCs is quite logical: the job is different, the personalities too. It’s not that easy since there are exceptions, but from what we’ve observed here are the differences:
👩🏻🎤 4 VCs personalities, adapt your pitch to them
We can observe 4 “kinds” of investors: emotional / rational investors and risk taker / secure investors.
The tendencies we’ve explained before still apply and always win no matter the kind of investors you have in front of you. However you can optimise your communication with them by spotting which kind they belong to and give them what they like.
The rational and emotional investor
|🥰 Emotional investor||🧐 Rational investor|
|Spotting them: they share values, care about founders, have a lot of compassion, in your business they will look for a positive impact on people/the world||Spotting them: hard to convince they believe founders that shows intelligence, smart moves and strategy, in your business they will look for proof of intelligence and strategy|
|Show honesty, care about your team||Don’t take harsh feedback badly, they’re just testing you. Instead show appreciation for that feedback|
|Prove the positive impact. Give example of satisfied customers and recurring customers (quotes, NPS…).||Give example of strategy you’ve build and used with success (give a proof of this success)|
|Story-tell your vision and precisely the impact it can drive for people and the world||Take the time needed to explain how your solution works if they ask questions|
|Don’t criticise, smile a lot||Talk about your market discovery, explain things that you’ve discovered and others didn’t notice, prove you’ve understood complex things|
- Our health is impacted by chemicals put in our cosmetics. We’ve built a tool that analyses the content of a product to tell you on a scale how dangerous for your health the product is. Simply by scanning the product bar code, people can start to buy, eat and better chose their cosmetics
Yuka > 🥰 Emotional investors
- We’ve built the best IA for self-driving cars. 10 years ago when no one did it, we’ve put many sensors and cameras to our cars to train our IA. Every drive was a way for our sensors to learn from the driver’s behaviours and now we have 10 years advance with the most natural self-driving car
Tesla > 🧐 Rational investors
The risk taker and the secure investor
|😼 Risk taking investor||🙀 Secure investor|
|Spotting them: when they speak about their previous investments, they explain how illogical the bet was, the crazy thing founders did and everything they did to “break the rules”.|
In life, they try and fail, their path is a combination of opportunities, not a straight and logical path.
|Spotting them: they like well done things, precision in execution. According to them, their founders are top in the field, seek perfection and well done things.|
In life, they follow a path and plan things.
|Talk about faking it until making it, show them the crazy bets that worked||Show that you’re an expert of your subject, show dedication, perseverance|
|Create excitation, enjoyment and speak in a playful manner. Give challenges||Be reassuring by using your data, answer every question calmly and precisely|
|Explain how your product will change the status quo radically, show breakthroughs||Show how you’re improving a repeatable process, something that existed for many years that you’re improving (not changing it radically, like online banking/insurance)|
|Show an audacious execution||Show an execution that respect the rules|
- We’ve built or own algorithms to find trains tickets. The one built by the French railway wasn’t good enough. Our tool is far better than the one build by their team of over 100 engineers and we’ve done it with 2 tech guy in a year
Captain Train (bough by Trainline) > 😼 Risk taking investor
- Hand sanitisers are boring and smell bad. We’ve improved them by making colourful sanitiser that smells good to attract millennials, they love it, our sales gone up for +XX% the last quarter
Merci Handy > 🙀 Secure investor
It’s a mix of those 4 personas
Each successful investment pitch should be addressing all 4 personas. In the same fund you can have the 4 personas so use them all.
Also, we’re all a bit of the four. If you successfully understand which kind of investor you have in front of you (by iterations), prefer one speech over the other, the result will be crazy efficient.
Don’t know which investor is which persona?
You can use Crystal to find out directly from their LinkedIn profile!
> Crystal knows
🕵🏻♀️ What VCs look for when investing
It’s key to remember what VCs do: they look for companies that can grow super fast and be sold with a high investment return.
To accomplish this, they will seek 3 things that you absolutely need to show:
- 🚀 Ambition: show investors where you want to go, prove that you always want more and won’t give up. Investors fear to invest in a team that succeeded but slowed down at a certain level: like making 2 millions MRR (monthly recurring revenue) and stoped there by fear of loosing everything. They will then look for teams that never stop scaling.
- 🤸🏾♂️ Execution: being ambitious isn’t enough. You need to prove what you’re capable of doing. Prove it with whatever you can, it can be past experiences, recruitment of an high level profile in your startup, recent accomplishments…
- 🧠 Learning curve: your company will evolve and your roles in it too. You need to learn faster than the average person to succeed and follow the pace. Prove that you’re able to learn faster than others.
Investors need to convince their own investors & team
Keep in mind that investors don’t invest their own money (except some rare occasions): they invest their LPs (partners) money (usually high net worth individuals, corporate investors etc).
VCs operate those people money and this results in one key thing: if you’ve convinced a VC, the job isn’t fully done, VCs will generally need to convince their own investors and their team to invest in you. Many deals don’t happen simply because not all the decision maker isn’t convinced.
Give easy to use arguments to help them
As a founder, you need to give VCs easy to use arguments they will reuse to convince their team/investors.
Example: you create a promising but complex technology. Your fundraising stands on your ability to vulgarise your technology. Since VCs will need to pitch your product to their team and then to their investors, give them simple arguments to help them “sell” your business to those people.
⚡️ What to said: be clear, specific and fact oriented
Founders have a tendency to fall in love with their product. That’s nice but because of that, they’re incapable of staying clear, specific and fact oriented.
Investors will look for proof of success where founders will talk about how cool the product is.
We can shift this by giving proof, examples and tangible data, KPIs… If you don’t have those kinds of things, start measuring them or just reconsider your decision of getting funded.
Here’s some ideas of data you can use to convince investors:
- We have a great product, our users love it > NPS, customer satisfaction, quotes
- The market needs X > market study/research, quote from recognised persons, your observations of the market (with data)
- We have X features that change everything > users quotes, market observations, identified pain (with data)
✍🏽 How to send cold emails to VCs
- Keep your email short
- Give a call to action (with how long the meeting/call will be)
- Write a killer subject (on point, precise and short)
- Explain why you may succeed where others didn’t
- Highlight essentials items by using bold
Subject: Startup with W MRR/growth look for seed funding
1. We are [*] and we sell [*]
2. We solve [*] problem for [*] persons
3. No one did it/succeeded before because [*] difficulty, we’ve cracked this issue by using [*], *proof of work*
4. We have [*] MRR/growth and plan a [*]€ fundraising to *what you will do with the money*
5. Can we jump on a 10 minutes call this week ?
Difficult to start? Try this methodology > How to send the perfect cold email to an investor
Arguments NOT to use EVER:
- No one did it before because no one got our idea (it’s just impossible, VCs meet at least 2 teams with the same idea/product)
- Messy description of what you do (“start with why” is great but stay simple and clear, most investors don’t understand what founders are doing, that’s because founders are more creative than VCs so don’t use creative thinking when pitching to them)
- Not giving numbers (whatever the number is, give insights, market understandings, KPIs…)
- We can do it because we’re passionate, that’s a good starting point but not enough
📜 Pitch deck examples
- Pitch deck sample & guidelines (Kima Ventures)
- Slide by slide pitch deck guidelines (Augustin Sayer, Newfund)
- AirBnb pitch deck
- Buffer pitch deck
- More pitch deck examples and observations
No more than 15 slides in general, stay short, concise and precise!
- Show ambition, good execution and a strong learning curve
- Remember that VCs look for objective, measurable and clear insights about your company
- Your business plan, hopes and future developments won’t interest them. They believe only what they see NOW
- Build a pitch that talk to each of the 4 VCs personalities