What Do VCs Look for in a Pitch?

In the growth cycle of a company, the focus and measurement methods vary at each stage. This article focuses on early-stage startups, especially Series A, examining how VCs evaluate your pitch. What would make Greylock invest in you? How do you distinguish between a good idea and an early business that VCs can invest in?

Do You Need a VC?

Out of every 500,000 new businesses with employees, only about 1,000 are VC-backed (0.2%). Under what circumstances does your business need a VC?

1. Can you succeed without venture capital?
2. Are you willing to give up some ownership in exchange for a partner?
3. Do you have enough ambition to build a transformative business?
4. Will you focus on rapid growth? What is the capital expenditure (CapEx) needed to get from here to there?

Why Do Startups Fail?

The top five reasons:

1. No market
2. Run out of money
3. Wrong team
4. Outcompeted
5. Pricing/cost issues

Regarding the "no market" issue, entrepreneurs have various validation methods. Some solve problems they've experienced for years, while others conduct surveys, interviews, showcase prototypes, or even co-develop products with customers. Good products are honed over time and can be costly, making feedback and direction crucial. What does your feedback loop look like? How do you convince yourself and VCs that this is a real opportunity?

Products and Channels Are Equally Important

• In recent years, the internet and mobile channels have enabled many companies to rise.
• Many tech giants have deep moats, not because no one can create better products, but because of their distribution channels.

Series A Pitch Deck Template

1. Agenda
2. Problem
3. Team
4. Mission & Approach
5. Market Positioning
6. Any proof?
7. Defensibility
8. Go-to-market / Distribution
9. Market / Landscape
10. Roadmap
11. Plan

The Power of a Good Story

A company is a continuously repeated good story told to employees, investors, media, customers, and partners until it becomes a reality.

Do You Really Understand the Term Market?

1. When exploring new markets, the market is unknown, and you only have assumptions.
2. The best strategy for niche-and-next against large companies is to focus and simply solve one problem well.
3. Once you have a niche, expand the problem scope.

Geoffrey Moore's Positioning Template

Problem	Explanation
For	A specific target market
Who	Has needs and opportunities
Product name is	A product category
Its selling point	What benefits it offers and why people buy
Unlike	Competitors or alternative products
It differs in	Describing the main differentiating points

Moats

Moat	Company
Technology	Google, Intel, Oracle
Ecosystem	Apple, Microsoft, Docker, YouTube
Network Effects	Facebook, Snap, LinkedIn, IG, Tencent
Marketplace	Airbnb, Uber, Alibaba
Product Leadership	Workday, Salesforce, ServiceNow
Distribution	Slack, Quip, Dropbox, Atlassian

In addition to the above, AI products acquiring unique datasets are also becoming a moat. This moat creates positive feedback: you may start without collecting data, but as more data accumulates, your product improves.

What Constitutes a Good Team?

Can you:

1. Define the right things?
2. Attract the best team?
3. Build the product?
4. Think independently?
5. Execute quickly?
6. Keep learning continuously?

Evidence and Data

Create a 3 to 5-year plan; it doesn't need to be overly precise. If you don't know the benchmarks to measure against, read the S-1 of relevant companies.

	Year 1	Year 2	Year 3	Year 4	Year 5
Profit Drivers
Profit
Cost Drivers
Gross Margin
Sales and Marketing Expenses
Cash Flow
Team Size

Also, consider the important unit economics:

1. Expected number of users per account
2. Customer acquisition cost
3. Gross margin
4. Customer churn/up-sell
5. Cost drivers

Be realistic and honest when facing data. :)

Overall, VCs Look for These Traits in Startups

1. A strong, ambitious team that attracts talent, with a founder/company fit.
2. A unique, simple, and compelling value proposition.
3. A strategy to dominate the market.
4. High-profit, capital-efficient growth.

Finally, Here’s a Word of Encouragement

There has never been a better time than now to become an entrepreneur.

Look to the stars while keeping your feet on the ground. Formulate a strategy and aim to dominate globally.