VC Perspectives

Before joining Creandum, I did an MBA at Stockholm School of Economics. The whole experience was really fantastic but many of us still felt a lack of entrepreneurial aspects in the curriculum and therefore we formed an initiative called the Entrepreneurship Forum with the aim to promote entrepreneurship and create a meeting place for everyone (students, entrepreneurs, investors) interested in entrepreneurship. Since then we have organized a number of events and last year we decided to create an annual event with a panel debate and networking opportunities.

Now it is time for our second annual event! We have gathered a really interesting panel who will discuss how to monetize digital content.

The panel includes Henrik Torstensson (SVP Stardoll and General Manager Piczo), Sorosh Tavakoli (CEO Videoplaza) and Ted Valentin (annonskartan, sushikartan etc), and will be moderated by Ville Vesterinen from Arctic Startup.

Hope to see you all on June 10!

What: Panel debate followed by a food and wine networking reception

Where: Stockholm School of Economics IFL - Sveavägen 63, Stockholm

When: June 10 from 18.00 (panel starts at 18.30)

Nota Bene: SEK 50 payable at the door to cover for food and drinks. Full-time students are free.

Please RSVP by June 5 latest by sending an email to courtney@open.se stating name & business/school. Seats are limited to 90 people so it’s first come first served.

Link to invitation on slideshare

Last week I was participating at an event called MoneyTalks in Helsinki which I found to be quite useful. Extremely well organized by Will Cardwell and his team at Technopolis with a great turnout of both Finnish startups and investors.

The keynote speaker was Petteri Koponen (founder of FirstHop and Jaiku and now working for Google and recently joining the board of Aito Technologies), who delivered a great presentation on the startup life-cycle. There were many hard-earned experiences shared but two things in particular got me thinking about my previous post on contacting VCs.

Basically Petteri meant that getting VC-funding is a numbers game so you better meet as many as possible. Also, the way to develop your pitch is to pitch, learn, pitch, learn, pitch, learn, pitch…

I think this is great advice but I also realize that it somewhat contradicts my advice on only contacting the right VCs so I wanted to nuance my advice based on Petteri’s input.

First of all, I still think that spending time learning about the VC is very important. Identifying the right person at the VC firm and make sure you’re addressing their investment focus is going to be critical. And avoiding VCs that are not likely to invest in your company will save you lots of time and frustration. But since VCs do have different opinions and preferences, it still make sense to try and meet quite a number of them as long as their focus reasonably well matches your startup. This is maybe even more the case in Silicon Valley where there are many more relevant VCs for startups.

The second is definitely extremely important. The only way to get better is by practicing and by learning from previous experiences. So don’t give your pitch for the first time to a VC, there are plenty of people on which you can practice your pitch on beforehand. Don’t visit your preferred VC at first, pick some other to practice on. And as no pitch is perfect from the beginning, make sure to update the pitch based on feedback and questions from the VCs.

A question that I often get is how startups should approach VCs. And similar to what Mark Davis suggests in an excellent post, my advice is: Don’t start with the question of how to approach a VC. Instead, start with the question of who to approach.

At Creandum, we screen several hundred companies per year and invest in 3-4 (having discussed this with other VCs, it seems like a hit rate of around 1-2% is pretty common at least in the Nordics). So to improve your odds at not only getting a meeting with the VC but actually walking away with some money, make sure you pick the right VCs to contact.

Contacting the right VC

Here are a few things to consider when evaluating the match between your startup and the VC:

• Portfolio - Check out our portfolio. What investments have we done (stage, technology, region etc)? Do we like to syndicate, i.e. invest with others?
• Focus - What are we looking for? As an example, at Creandum we’re looking for companies that have the potential of becoming successful international companies exiting at €100M or more. This means rapid growth and limited “me-to” opportunities.
• Individuals - usually VCs have short bios of the investment teams. Do we have people that are likely to understand your product and market? (this usually increase the odds but not always, sometimes it is easier to get excited when one doesn’t understand all issues…).
• Fund characteristics - the size and age of the fund plays a big role in how a VC invests. Usually VCs have funds of 10 years. During the first 4-5 years we invest in new companies, then we only make follow-on investments. And the fresher the fund, the more likely it is that the VC will make early-stage investments. Why? Because at the end of the investment period, there is not enough time for the younger companies to developed into large exits.

Contacting the VC

The process differs from VC to VC, but here’s how I would go about it (based on how I like to be approached):

1. Try and get a referral from entrepreneur, other VC, friend/advisor of the firm, portfolio company - Someone that can vouch for you and get them to introduce you to us.
2. Make yourself known to the VCs - PR works, we do read blogs & articles.
3. Create a really good presentation of what you do and send it to us - I prefer powerpoint/keynote of around 10-15 slides. Explaining what the presentation will look like probably merits a blog post on its own, so let’s come back to that later.

If you have selected a VC that invests in companies with your profile and you nail at least one of the above points, you’re more than likely to get the meeting.

Yesterday I was participating as a mentor at Mini Seedcamp in Helsingborg where 20 startups had been selected to pitch their business idea and get feedback from mentors and fellow entrepreneurs (for more info about the event, check out Arctic Startup and the Mini Seedcamp blog).

It was my first visit to a Seedcamp event and I really enjoyed it! Very professionally organized, many very interesting people, and lots of energy. As a VC, it is always useful to get out and screen startups and ideas, but this time the main purpose was really to assist the startups with insights about the fundraising process, what it is like to work with a VC and help out with ideas about their businesses.

I found the mentor sessions especially interesting, because it really gave both entrepreneurs and mentors a possibility to dig a bit deeper and get into discussions about how to develop the business. However, it also made it quite clear that many startups in their initial 5-minute pitches hadn’t really managed to explain what they do (Jussi Lakonen also covers this in his blog post).

Although 5 minutes may seem far too little to explain your business and why it is great, it is often all you have so I will highlight a few things that I experienced during the pitches.

I think most pitches would be so much better if the presenter remembered that it is not about how much info he or she can provide, it is all about what info the listeners take away.

Here’s some other simple and (perhaps obvious) tips:

• Know your stuff in and out - this means plenty of rehearsel and a necessity to nail the points below
• Keep the time - most teams had problems with keeping the time and as a result rushed through too much material during the last minute or totally missed the punchline
• Have eye contact with the audience - make sure you stand so all people can see you and look at the audience rather than on the screen
• As presenter, pick the person in the team that is the best communicator and has a good command of the language - it doesn’t have to be the CEO and it is most likely not everyone in the team
• Associate your company with a punchline, a snappy line that summarizes what you’re all about

And remember, you’re there to tell a story. A story about the most exciting thing in your life - your business idea. Don’t let that get destroyed by crowded powerpoint slides filled with lots of text and hard-to-see graphs.