Updated: Sep 20, 2022
Congratulations! You’ve got the meeting, and the opportunity to pitch your startup to a VC or PE investor. You’ve prepared a pitch deck and practiced your presentation. You are doing everything right (or so you think). You know your company inside and out, and believe you have a great story to tell.
What could possibly go wrong?
Actually, lots of things.
But there are some problems you can avoid before the meeting by understanding what VCs and PE investors will be looking for in the meeting. During the pitch, it’s not about you – it’s about ensuring your pitch hits all the points that your potential capital partner across the table needs.
The Investment Memo
Every VC or PE investor you meet (should) have a defined process for making investment decisions. Each firm will be slightly different, but the differences are usually centered around sector, stage, and other similar issues. In your meeting, they will be taking notes and putting those into an investment memo. The memo is an integral part of their decision-making process, and will be the foundation for every decision they make.
Normally, they won’t share the investment memo because writing a good one is (a) hard work, and (b) they don’t want to expose any misunderstandings they might have.
However, it does happen – the best VCs will often let founders review the investment memo before they share it with their partners, but you have to ask.
Just remember that the memo gets shared up the food chain – so a VC or PE may be reluctant to share. They don’t want to look silly in front of their teams (or bosses) any more than anyone else.
So what do they look for?
In broad terms, an investor will be looking for a number of key items including your mission & vision, key risks, information on your customers & product, the market, any traction you have, and your team. Steve Schlafman has posted a really good investment memo template that is pretty comprehensive and hits all the points that VCs will want to know. Use this as a guide to how you will present, and you won’t go wrong. You may not get a “Yes”, but at least you’ll have pitched it properly and given yourself the best possible chance of success.
Some other resources to look at include (Medium has a lot of information on this subject, so go there and search it up):
Muhan Zhang’s blog has a wealth of information about deal memos.
NextView’s blog post, The Investment Memo
Y Combinator is almost always an excellent source of information for founders – bookmark their site
So – be sure you are pitching to your audience, not to yourself!
If you are visually oriented, here's a great video explaining how to know if a VC is genuinely interested in you.