I never regret my time spent as an analyst in a venture capital (VC) firm. It was the experience of meeting with inspiring entrepreneurs that ultimately led me to switch seats to start my own company. I met with, on average, eight hopeful start-ups and reviewed 10 investment proposals.
This insider knowledge proved invaluable in positioning me and my co-founder Louis Buys to raise just under $1M in seed funding to develop and launch Revix, our fintech platform catering to newbie cryptocurrency investors.
From my experience, here’s what it takes to stand out from the crowd:
Nothing beats a warm introduction to a potential VC investor. A referral from a trusted source will bump you to the front of the queue.
Don’t waste your time using the generic application listed on the website. Yes, you may get a reply, but these inboxes are usually inundated with applications. It will take ages for your pitch to reach any level of decision-maker, and you don’t have the luxury of time.
If your network doesn’t yield results then spend time tracking down the right people on LinkedIn. Put the effort in to research what types of investments different VC firms make and then find the key players to engage with. Also, think broader than pure venture capital players.
Revix was initially funded by Sabvest, a JSE-listed investment holding group, which is not your typical venture funding player. Then write a personalised direct message on LinkedIn. If you don’t get a reply back, don’t give up. Send another message or pick up the phone. Without being a complete pest, persistence and grit will lead you to funders.
No serious VC will take a stake in a company based on a PowerPoint presentation alone. Because pitch decks are shallow and aren’t that difficult to throw together.
Forget the elaborate graphics and put the real work into developing a solid business plan with detailed information about your proposition. This would include your budget and forecast and research about your target market. Yes, your financial and marketing predictions may not play out as expected (they seldom do) but investors need to be reassured that you’ve put the inadequate time to research the opportunity.
If you don’t understand the investment proposition inside and out, how can you possibly sell it to someone else?
Yes, the numbers matter, but nothing sells your proposition more than a strong narrative. From my experience, about 10% of the investment decision rests with the credibility of the entrepreneur while a chunky 90% is based on the story.
Storytelling refers to effective communication about your venture’s potential and the value you can add in unlocking this potential. I highly recommend the book Narrative and Numbers: The Value of Stories in Business by Aswath Damodaran, a finance professor and investor.
The venture capital model does not suit small opportunities. Investors are looking for solutions that can scale up. You really need to think beyond your local market. South Africa is a very small market. If your idea doesn’t work beyond our borders, then you need to reconsider.
About the author: Sean Sanders is the co-founder of Revix, an investment platform offering investors access to 80% of the global cryptocurrency market. He is a CFA Charterholder and an expert in technology-focused investment management and trading strategies. His experience working for capital providers includes technology-focused analyst roles at Knife Capital, a growth equity focused venture capital firm and Sabvest, a specialist JSE-Listed investment holdings group. His other startup endeavours include Blocktree Capital, a proprietary cryptocurrency investment firm, and Application Portal, an online and automated application solution aimed at the university and higher education space.