Stanford Entrepreneur Trek 2009

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Know Your

Audience

Know Your

Business

Persuasion and

Risk v Reward

Presenter: Steen Andersson Co-Founder & Vice President ([email protected])

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Know Your Audience

•  The pitch starts well before the meeting… •  Tim Draper’s Blog

•  Try: –  Getting introduction (not a cold call) –  Research other similar investees of that VC –  Research articles written by VC himself –  Speak to colleagues of VC about the individual’s "

view on your type of business – develop objection management –  Understand the specific vs global hot buttons – network effect, etc.

5thfinger

h"p://www.flickr.com/photos/11266609@N00/2872069583/

Know Your

Audience

Know Your

Business

Persuasion and

Risk v Reward

5thfinger

Know Your Business

•  Know more than the VC •  My good friend went to…

•  Try: –  Finding a confident one liner on each direct and indirect competitor –

“XYZ is great at this but their platform is not gear to do this”"“We just hired X from their sales team and we learnt Y”

–  Be able to talk to all parts of your business model –  Understand and have a position on all the risk areas – have an elevator

pitch around the risks they will ask: “what are the key risks? ”

5thfinger

h"p://www.flickr.com/photos/11266609@N00/2872069583/

Know Your

Audience

Know Your

Business

Persuasion and

Risk v Reward

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Risks vs Rewards and Persuasion •  Understand the risk profile & stage of the investor

–  Seed <$1M –  Series A [5i] $5M (or now $500K?) –  Series B $10M - $25M –  Series C (Mezzanine) $X – growth

•  Mantra: Bring Risks Forward –  Most entrepreneurs focus on building a business around what is easy

or what is working, without addressing the ‘hard’ questions. This a big risk for investors. Burn lots of cash building a product before realizing that the revenue model is flawed.

–  Example – Genentech & Tom Perkins

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Risks vs Rewards and Persuasion

•  Key areas of risk for investor: Area I would hesitate raising funding

before… Examples of how to bring forward risk

Sales & Marketing Strategy Having at least one reputable customer testimonial – Beta Ok.

Talk about the sales strategy moving forward (specifically) and how you will quickly know if there are going to be any road smashes.

Technology Risk Having proven that the core challenges have been nailed.

In the product dev plan, showing that any risks remaining will be tackled upfront will win you points/respect.

Management Execution Risk Find A grade people who you can motivate about your idea and have them agree (on paper ideally) to join you once your funding is closed.

If you can test the team by giving them a very tough challenge up front and then supporting them to nail it, that will help give the VCs comfort that this risk is minimized.

Market Risk Speak to potential clients and get in writing their interest in you product in development.

Get these customers to become paid customers as soon as possible.

Competitors Demonstrate that you understand the competitive landscape.

Go up against these competitors on clients to find out why they

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Risks vs Rewards and Pursuasion •  Danger areas – pre-empt! •  List out ALL possible objections and have responses:

–  You can’t scale that! -> motivated partners, network effects –  The technology is not protectable -> first to market & speed –  The clients are hard to reach -> clever channel management –  Your team is inexperienced -> brilliant with networks of support

•  In business, I honestly believe its not what you say but how you say it.

•  This runs true with pitching, but VCs are too sharp for you to bullshit. You need to speak with confidence and with good material.

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thanks

San Francisco Office +1 415 294 2040

Sydney Office +61 2 8307 7888

New York Office +1 646 578 8202

Steen Andersson Co-Founder

[email protected]

415-294-5194