We Just Need 1% of China


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Slides from a Skillshare class taught by Brett Topche of MentorTech Ventures. The class description is below.

It has happened to so many entrepreneurs. They go into a pitch meeting, tell their story and come out of the meeting excited to move forward with the investor. Then, they're shocked when the investor passes on the deal. Why did it happen? A lot of the time, it is because the entrepreneur violated one of these basic rules of how to talk to a VC about your business.

In "We Just Need 1% of China" and Other Things to Never Tell a VC, students will learn some of these deal-killing comments and how to talk about their business in a way that will make the VCs much more comfortable with the team and the plan.

Published in: Economy & Finance, Business
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We Just Need 1% of China

  1. 1. We Just Need 1% of China<br />And Other Things Never to Tell a VC<br />
  2. 2. Wait, before we start, who the heck am I?<br />9+ years in venture capital/private equity<br />First with NJTC Venture Fund<br />Seed- and early-stage deals in and around NJ<br />Now with MentorTech Ventures<br />Investing in and mentoring startup companies<br />Everything is connected to Penn!<br />
  3. 3. Why Does This Matter?<br />Your idea is only a small part of your success<br />VCs are trying to get comfortable with the team they would back<br />Some of the things entrepreneurs say make them appear to lack credibility, seriousness or trustworthiness<br />
  4. 4. “We Just Need 1% of China”<br />Sounds great, the market is huge<br />Ultimately, the size of the company is limited by the size of its market<br />
  5. 5. “We Just Need 1% of China”<br />The first 1% is the hardest to get – 0 to 1 is a much bigger jump than 9 to 10<br />VCs want companies that will be market leaders, not 1% players<br />Shows lack of ambition & confidence<br />
  6. 6. “We Have No Competitors”<br />Sounds like you’ve got the whole market to yourself<br />Few competitors means shorter sales cycles and more opportunities<br />
  7. 7. “We Have No Competitors”<br />If no one else is doing it, you may not be solving a big problem<br />If it’s clearly a big problem, you are likely either overlooking competitors (bad) or willfully not mentioning them (worse)<br />For a lot of businesses, the biggest competition is “doing nothing”<br />
  8. 8. “We Will Figure Out Our Business Model”<br />If you get enough users, surely that has significant value<br />Look how successful Twitter has been before really nailing their model!<br />
  9. 9. “We Will Figure Out Our Business Model”<br />At the end of the day, most businesses are valued on profits, not eyeballs<br />There are rare exceptions, but you probably aren’t one of them<br />Have one or more concrete ideas for how to monetize (and don’t just say “AdSense”!)<br />
  10. 10. “We Will Be Viral”<br />Virality is great – it can dramatically lower customer acquisition costs<br />Word of mouth can have far more impact on a given customer than traditional ads<br />
  11. 11. “We Will Be Viral”<br />Few businesses are inherently viral<br />Have a Plan B for making sure potential customers know you exist<br />It’s a big internet out there!<br />
  12. 12. “We Have A Great Team Who Will Join Post-Funding”<br />Top people want the security of a salary<br />Much easier to join a company that has the endorsement of a VC and the security of cash in the bank<br />As long as they join at funding, the VC should be OK with it<br />
  13. 13. “We Have A Great Team Who Will Join Post-Funding”<br />Why wait? The best leaders are able to get people to believe in the vision and join early<br />VCs will call these people, so if you bring them up, the commitment better be firm<br />This isn’t fantasy baseball. Team dynamics matter. If you haven’t worked together yet, that is added risk in the business.<br />
  14. 14. “Our Projections Are Conservative”<br />You have almost certainly cut them back and added in plenty of contingencies<br />Your product is so great it is sure to be an instant hit<br />
  15. 15. “Our Projections Are Conservative”<br />VCs hear this every day in every pitch, but companies rarely exceed projections<br />Companies often have longer sales cycles than they thought, unexpected costs, etc. that they don’t know until they’ve been operating for a while<br />When you’re pre-revenue, a major revenue ramp is, by definition, not conservative<br />
  16. 16. “This Is The Only Money We Will Ever Need”<br />Lower risk for the investors<br />Minimal dilution for everyone going forward<br />
  17. 17. “This Is The Only Money We Will Ever Need”<br />Even successful businesses often need more money to scale<br />Investors want to know that your cash planning & management is realistic<br />Many investors would see this as a negative even if you’re right – they want to put more cash to work<br />
  18. 18. Things to Keep in Mind<br />VCs want to find great companies – tell us about what you have right now that’s different and better<br />Show some kind of momentum. VCs won’t invest after one meeting, so show short term goals and reach them.<br />Back up as many of your statements as possible with third party data<br />Every early stage business has risks. Don’t deny them, acknowledge them and discuss your plan to cope.<br />
  19. 19. Any Questions?<br />Feel free to contact me any time<br />Brett Topche<br />MentorTech Ventures<br />3624 Market Street, Suite 300<br />Philadelphia, PA 19104<br />brett@mt-partners.com<br />(267) 295-1395<br />@BrettTopche<br />