In Part 2, Jeff gives advice on what entrepreneurs should and shouldn’t do when pitching their ideas to VC’s and what are the most commonly used.
SEAN: I think you go into something like 40 pages on the pitch itself, and this, kind of, just hits home for me because I… you said in one of the beginning chapters that very few entrepreneurs do it well and almost all of them hate it. Right? And I think that the same can be said for sales. I find that having spent the last five years in the [Silicon] Valley, I find it really surprising being around tons of Stanford people who are just incredibly smart entrepreneurs, technically incredibly savvy, but who either just don’t understand sales or understand that, you know, that there’s a sales process, or have any kind of desire to understand it. Yet, they’re trying to run, you know, a big company. [chuckles]
JEFF: Right.
SEAN: So, in the context of how to pitch for money what are the take-aways from, you know, from your content of your book?
JEFF: I think a couple of things: one is that VC’s blink and in the first ten to fifteen minutes they make a decision about whether they want to invest the next 30 to 45 minutes.
SEAN: Yep, yeah.
JEFF: So you have to establish credibility in those ten to fifteen minutes.
SEAN: Absolutely.
JEFF: Why are you uniquely able to be effective in pursuing this business? What’s your unfair advantage in pursuing this? Why can’t five people in the Silicon Valley, five people at Harvard, five people in India do that exact same thing? And then have that sort of summary review but also the depth. I tell a little bit of the story of when I was an entrepreneur pitching [INAUDIBLE], and how mortified I was when pitching the full Kleiner partnership — and we eventually did get the funding from Kleiner — but John, in particular, was pushing me on the financial model and going five levels deep in his questioning and I was not fully prepared and I stumbled and my co-founder stumbled and we sort of muscled our way through it. But I, afterward sort of, vowed never to be as unprepared as I was heading into that meeting, that I would know every cell on every spreadsheet that I would show at so many levels so that you would never look unprepared. And I think that’s critical for the entrepreneur.
SEAN: Yeah, absolutely. So preparedness is huge obviously, and understanding your own business model and business plan and probably anticipating as many hard questions as you can and getting other people to ask them first.
JEFF: Yeah, one of my partners like to say, “when you have risks and flaws, don’t hide them, feature them.” I think the thing that most impresses VC’s is when the entrepreneur says, “here are the risks in the business and here’s my plan to mitigate those risks.” You know, just be very direct and honest. When entrepreneurs, sort of, don’t talk about the risks, it forces the VC to pull them out and identify them, and then the VC thinks, “well…”
SEAN: …he doesn’t even know…
JEFF: …Yeah! Maybe they don’t even know, and if they don’t know the one I just thought of, what are the three others that I didn’t think of that they don’t know? I talk about Christoph Westphal pitching John Henry, the owner of the Red Sox, on Sirtris, and he says to John Henry…
SEAN: So the term-sheet is pretty tricky, right?
JEFF: Yeah.
SEAN: There’s are good sites now like TheFunded.com with lots of sample term-sheets on them and probably more information than there ever has been from entrepreneurs about what to watch out for. But what would you think are the main… it’s probably hard for you as a VC to say honestly, like, “these are the things you don’t want to sign off on,” because then someone will come to you and use it against you . Right?
JEFF: You know, it’s funny, I did this in…I did a whole chapter on term-sheet terms and negotiations. And one phrase that I use, which is very common, is that in many partnerships when entrepreneurs push on price, the partnership says, ” hey, if you loved the deal at 7M pre, you’ll love the deal at 9M pre.” I mean, if it’s going to be a great success, it get lost in the noise. So I get teased a little bit by entrepreneurs who throw that back at me. But, no, I try to be very transparent in revealing all of the elements of control, and all of the tricks that VC’s can play on control, all the elements of price and all the tricks and knobs that you’ve got to worry about on price.
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