How To Pitch VCs On Complex Tech

How To Pitch VCs On Complex Tech

Howard Bornstein (Principal @ Innospark Ventures) and Stan Reiss (General Partner @ Matrix Partners) shared their inside view on how founders can effectively communicate technical complexity to VCs and stand out from the competition. Here's what we learned...

Product Market Fit

  • Being the first to nail down product market fit is a powerful tool and has a compounding impact for paving the way. 
  • When proving product market fit, think of it as a hierarchy:
    • Reveue-generating customers with committed contracts is best
    • Paid pilots follows
    • Then unpaid pilots
    • Customer interviews for startups that are pre-product
    • Then expert opinions
    • And last, the investors opinion on the pain point. 

RELATED: How Investors Can Help Restart Growth

Pre-Product Startups

  • Startups that are pre-product and are trying to prove product market fit should think about:
    • What is the fastest way to 100 conversations with potential customers?
    • Within those conversations, how can you validate the pain point? 
  • In regards to timing, investors are looking at a maximum time period of 3 years before product launch when investing in a pre-product startup. Biotech is an exception.

The Founding Team

  • For technical founders, it's key that they can demonstrate the ability to communicate and build relationships with their customers. 
  • Investors are looking for the right people with the ability to solve the complex problem. Ask yourself:
    • Do you have an expert on your team?
    • If not, are you the type of person who can attract the right talent?
  • When investors are reviewing technical founders, they're looking for self awareness, signs of tenacity and grit, an interest in learning, and the intuition to ask the right questions. 

Investor Founder Fit

  • Know your audience! When l potential investors, try to find people who will appreciate the complexity of your tech. Check out Pitchbook - who invested in startups similar to yours? 
  • Spend time thinking about what the right type of investor is right for you.
    • Government, angel, or VC?
    • What's the desired speed of the funding process?
    • How much ownership are you looking to give away?
    • What size organization would work best with your company?
  • With the pandemic and traditional networking unavailable, some investors are more open to cold outreach but remember that it's best to send a thoughtful inquiry. If possible, always try for a warm intro over cold outreach. 

RELATED: How to Land a VC Partner Meeting

The Investor Mindset

  • Wondering what's running through the investors head. Investors are looking to answer the following questions before making an investment:
    • Is this a complex problem? Is this a thoughtful approach? Is there an elegance to this approach? 
    • Does this solution have long-term competitive differentiation? 
    • Can this founder bridge the need and the market and solve the real problem?
    • What have they done to prove product market fit? 

Thank you Howard & Stan for taking time out of your day to share your expertise with the greater Venture Lane community!