The trick is to work smarter, not harder, when it comes to pitching on the Prairies.
Instead, relationships grease the wheels for eventual meetings. Plus, relationships usually help companies attract “smart money”– the kind of money that comes with expertise and guidance – as opposed to “inexperienced money” which simply follows existing investment trends and offers little guidance.
Getting funded can be overwhelming. When you consider the amount of work that goes into getting funded – nurturing relationships with VCs, developing compelling pitch decks, preparing for meetings – it’s a miracle founders have time left over to dedicate to actually building their business. The trick is to work smarter, not harder, when it comes to pitching on the Prairies.
While there are success stories of cold emails to VCs turning into multi-million-dollar seed rounds, contacting firms out of the blue is an inefficient way to get funded. Instead, relationships grease the wheels for eventual meetings. Plus, relationships usually help companies attract “smart money”– the kind of money that comes with expertise and guidance – as opposed to “inexperienced money” which simply follows existing investment trends and offers little guidance.
Warm introductions are critical. They lead to more meaningful discussions that cold introductions don’t foster. In some cases, investors are restricted from pursuing unsolicited pitches.
If you’re a founder without existing VC connections, this puts you in a tight spot: How do you go about securing these warm introductions?
First, understand that building VC relationships from scratch is possible, but that it won’t happen overnight. As business advisor and author Diane Helbig put it, “Networking is an investment in your business. It takes time and when done correctly can yield great results for years to come.”
Then, use your existing connections to expand your network through a tactic known as lead mining.
A network map provides an overview of your connections, where they’re concentrated, and who can provide links to valuable second- and third-degree connections. It also gives you an understanding of which important clusters are underrepresented and warrant extra attention.
Your super connectors are the contacts who have the relationships to introduce you to the right people. They are the individuals you should focus your attention on and with whom you should try to secure a meeting. Avoid the temptation to immediately ask for a favour. As entrepreneur and bestselling author Keith Ferrazzi put it, “The currency of real networking is not greed but generosity." Instead of making an ask, identify what your contact’s current problems are and where you can provide a solution.
Eventually, it’ll make sense to bring up what you need. Mention what you’re trying to accomplish and who you need to meet to reach your goals. This requires tact, since you don’t want your new connection to feel like they’ve been duped into a transactional “you scratch my back, I’ll scratch yours” relationship.
“Making your ask” will pay off with some people and turn uncomfortable with others. Some contacts may resist your ask or reveal that they aren’t the “super connector” you initially thought they were. Take the hit, preserve the relationship, and remember that you’re lead mining. There’s no guarantee that all of your efforts will hit paydirt. It’s a numbers game, which means persistence is key. Rinse and repeat. If you’ve set your parameters well, you’ll eventually hit gold with the right introduction.
Lead mining activities shouldn’t put an end to your networking activities. Continue networking, but be sincere and deliberate about how you do so. Networking is not about rapidly adding new connections. It’s about building meaningful, mutually beneficial relationships with others.
Once you’ve secured warm introductions to a few VCs, how do you convince them that your company’s worth their investment?
In the early stages of your startup, you likely lack the metrics to prove that customers are eager for your product or service. This kind of traction is usually what investors seek. If it’s impossible to prove this without access to funding, you can break out of this catch-22 by focusing on your total addressable market (TAM). This represents the revenue opportunity for a product or service. You want to demonstrate that:
a) a sizable market exists, and
b) it’s possible to capture a meaningful portion of this market
Do this and you address one of the most important things to an investor: the opportunity for outsized returns. That said, you also want to make it clear that the market isn’t so large that it’s easy to get swamped by competitors who have more resources and more funding.
TAM: Your total addressable market or total available market. This is the amount of money up for grabs if you secure 100% market share.
SAM: Your serviceable available market is the portion of your TAM that is within your geographic reach.
SOM: Your serviceable obtainable market is how much of the SAM you can capture.
For example, an insurtech company that provides digital brokerage services for auto insurance would have a TAM of $739 billion. Their SAM would be the areas within which they’re licensed to operate (e.g. Alberta), and their SOM would be the slice of the Alberta auto insurance industry they can capture (e.g. car owners between the ages of 24 and 34).
Even with an impressive total addressable market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM), you’re still climbing uphill. At every turn, the lack of hard metrics and traction makes it hard for potential investors to see the promising opportunity. This is where storytelling is critical. Weave a narrative that helps people understand the pain points that make this solution desirable. Where possible, draw connections to how this ties into your investor audience’s own lives. A strong narrative and vision can help you get that initial buy in.
VC firms take hundreds of meetings per year. You’re not just competing with companies in your space. You’re competing with all the other companies they heard from on the same day as you. You want to appeal to that VC audience’s sense of legacy and destiny, so they feel like investing in you is like investing in the next big company – an opportunity they can’t afford to pass up.
“Every investor wants to find something to believe in,” says Gold. “Their job is to believe and your job as a founder is to tell a story that shows them the path to greatness. When investors take the meeting, they want to believe that you are the one. Your team is the one team. And with just a small amount of capital, you are going to achieve greatness together.”
Make it easy for investors to distinguish your company from others. In other words, you want to be the signal, not the noise. An effective way to do this is to draw analogies to other successful startups. There’s a reason the media often refers to new companies as “Uber for X” or “Like Facebook for X”. Comparisons make it easier for people to understand the value in a new business. People pay more attention when an idea has a successful precedent.
If you should be pitching early and funders don’t expect you to bring a perfect product and a thousand customers to your pitch meeting, what do they expect you to bring?
An all-star founding team.
A great founding team with deep knowledge and industry experience demonstrates that your business has the one thing the VC doesn’t – the industry expertise to turn an idea into a disruptive business.
“We collectively get one or two great ideas in our inbox on a daily basis,” says Jason Drummond, co-founder and partner at Broad Street Bulls. “I can come up with a great idea tomorrow, but can I execute on it? Probably not. You need that team to build on it, execute on it, and be relentless.”
Understanding how you’re going to attract the different types of people you need to succeed is also essential, and if you can represent key types of talent in your founding team you’re off to a strong start.
“There’s unicorns, eagles, and otters,” explains Ring, CEO at Manitoba Tech Accelerator. “The unicorn is someone who thinks about something, is a visionary, and says we’re gonna go do this. The eagle is more like the COO who’s gonna mind the fort and operationalize things. The otters are the folks punching out the code and getting it all done. We now have great unicorns, great otters, but we don’t have enough eagles. A company that’s got an MVP and beta customers needs someone to steer the rudder and keep it on course.”
When founders decide to seek funding, attention quickly turns to the famous pitch deck. A pitch deck is an important communication tool, but it must be used as just that – a tool. Its value only comes from how founders use it and approach the process of making one.
“Don’t view pitch decks as a checkbox exercise,” advises Phenix. “One of the biggest benefits of the pitch deck to the company is the process of building out the content that goes into it, completed by both the founder(s) and the team. You need to build the pitch deck for yourself and your team so everybody is on the same page with a plan, strategy, and communication lines. We don’t care that you follow Pitch Deck 101. We care that you took the steps to build out some initial plan and strategy.”
In other words, your pitch deck should be a reflection of how you and your founding team thinks about your business and its strategy. Ensure the contents of your pitch deck are already fused into your business. Once that happens, your pitch deck becomes an integral part of making a good impression during your pitch meeting.
“I can understand the product and the market from a good pitch deck, but I won’t get to know the founder until I get on a call or see a pitch,” explains Jonathan Lipoth, Lead Analyst at Broad Street Bulls. “That’s how you get the second meeting. It’s being impressionable and strong and memorable when it comes to presenting to funders. In terms of how you use a pitch deck, it’s about being memorable and selling yourself as a founder. The product and market are essential pieces, but they should be used to convey how strong the founder or founding team is.”
Finally, practicing your pitch over and over again is important, not just for overcoming nerves, but for covering all your bases.
“When you’re nervous that in and of itself is not a problem, but when you’re nervous you miss things and you don’t tell the story and sell it properly,” says Drummond. “Run through that pitch ten times beforehand so at least you get to tell your story right.”