Damien Steel, Managing Director of Canada’s largest-tech focused Venture Capital fund, OMERS Ventures, gave a candid talk about venture capital at a recent meetup held at Deloitte in Ottawa. Damien covered everything entrepreneurs yearn to know about venture capital but are too afraid to ask. Here are a few takeaways from the chat:
Understand who you’re pitching to
Your pitch should be tailored to whatever type of investor you’re pitching to. Think about it like a sales pitch – if you don’t understand your customer, then how will you sell to them? Damien points out that entrepreneurs should make sure their ask makes sense for the type of investor they’re meeting with. For instance, an entrepreneur shouldn’t go to an institutional investor and ask for $1M – it’s probably not the field they play in.
Pitches: the good, the bad, and the ugly
A good pitch will get to the point quickly, and clearly outline what business pain is being addressed by the company’s solution. The pitch will also clearly define the market need for the product and demonstrate multiple ways to monetize.
Damien points out that asking VCs for a signed NDA is off putting. He has built his reputation on the ability to be discreet and maintain confidentiality, so an NDA is unnecessary. He also advises entrepreneurs not to go into the pitch with a pre-written set of terms or set valuation (some exceptions apply: angels, as an example) as it will potentially force a ceiling on what the investor is willing to give.
Other tips … don’t be the unprepared founder with no slide deck and on the other side of the spectrum, keep the slides to a minimum: a 50-page deck will not work in your favour.
Damien also cautions entrepreneurs to stay away from talking about exits with certainty. Don’t build a company just to sell it.
Even worse are founders who get angry when their assumptions are challenged during a pitch. But probably the biggest red flag, in Damien’s opinion, are lies or embellishments about the connections an entrepreneur mentions, or firmly stating customers in their pipeline. A lie will always be uncovered with a quick phone call or during due diligence, so just don’t do it! It’s not worth the damage to your reputation and trust you’re in the process of establishing with your investor.
Life is too short to work with people you don’t like
When you raise money for your company and accept an investment, you’re in entering into a long-term relationship and partnership. Make sure you align yourself with investors you could see yourself getting along with, adding value, and being able to weather potential storms together. Damien stresses that he invests in people, not businesses.
Closing a funding round doesn’t make a startup invincible
One of the main points Damien drove home was that raising money does not define a startup’s success. The tendency for people to equate funding with success is overemphasized, and what really matters is what happens after the raise.