US-based Sequoia Capital is one of the most notable VC firms in the world. Despite continuous fluctuations in India’s startup ecosystem, Sequoia has been able to bet on some really good business models in the country.
With its focus on sectors such as energy, finance, enterprise, healthcare, internet, and mobile startups, the firm has made investments in companies such as SirionLabs, Grofers, Zomato, GirnarSoft, BYJU’S, Zillingo, BlackBuck, Stanza Living, and more.
India currently boasts more than 39K startups (as per Inc42 Datalabs). New startups are coming up every day and startup ideas are a dime a dozen. But, only a handful of startups are able to gain funding, particularly from prominent VCs like Sequoia.
Aaref Hilaly, partner at Sequoia Capital, explains the reason for this in his latest blog post. Hilaly not only discusses the mistakes entrepreneurs usually make while interacting with investors but also suggests a standard deck that can be used to pitch to them.
Mistakes Entrepreneurs Make
While reminiscing his early days of entrepreneurship, Hilaly writes in the blog, “When we tried to raise money, it was hard to get first meetings at venture firms. But what was even harder was that even after getting in the room, many investors barely seemed to pay attention.”
After a series of rejections, Hilaly and his team realised the one thing they were doing wrong. “Our mistake was to assume that if you get a 60-minute meeting, you get 60 minutes worth of attention. You don’t.”
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According to Hilaly, the typical attention span in an hour-long meeting goes something like this:
How Can Entrepreneurs Change This?
As Halily writes, “You need to convey the main reasons why an investor should love your business in the first 5 minutes.”
The first three slides of the pitch deck can certainly change the game. Here are the things you should focus on:
- Explain how the suggested innovation can open a window for a new company
- Define the company/business in a single declarative sentence
- Demonstrate the company’s key metrics/fast facts such as product-market fit, market traction, use cases, etc
All this gets covered in about five minutes. At this point, instead of going into further details, one should run a quick check on the sentiment of the investors so far. “So, after laying out the agenda, we like to ask the investors whether there are any particular areas of concern or questions we should be sure to address,” explains Halily, in the blog.
Pitfalls To Avoid
Halily believes that if the first five minutes have been done right, the entrepreneur has most likely gained the investors’ attention span for the next 15 minutes, which, in turn, will interest them enough to listen for another 30 minutes.
Going ahead, while there are a number of ways details can be shared with the investors, it is essential that each point be taken forward with utmost clarity.
Here are some of the pitfalls entrepreneurs should avoid:
- Pain point: If you cannot convince an investor there’s something broke, they will not be interested in a solution.
- Solution: A picture/demo is worth a thousand words.
- Market size: Do not put up huge numbers from some market study without any details to back them up.
- Competition: It’s best to identify all your competitors then have the investors discover them afterwards.
- Team: If the investors are listening to you so far, it’s worth spending a couple of minutes on the founders’ backgrounds, highlighting any special talents or experiences that make them well-suited to building the business.
- Financials: It’s easy to lose yourself in numbers. Keep it simple and just show on a timeline of how you would spend the money (for instance, headcount) to achieve specific milestones (for instance, launching the service).
The Final Tip
The best presentation is one that leaves ample time for discussion. Halily suggests that one should target to wrap up the presentation in a maximum of 20 minutes.
He aptly concludes, “It’s true you need to brief the investor up front on what you are doing. But the quicker you can get through that to a two-way dialogue, the more meaningful the exchange will be for both sides.”
Here is the complete pitch deck suggested by Sequoia Capital for a smooth presentation: