Pitch perfect: How the best tech businesses raise investment
Forty was the number of times Daniel van Binsbergen pitched to investors when he was looking for £850,000 to grow his tech business.
To get to that stage he had got in touch with contacts to drum up interest, asked for introductions to entrepreneurs and looked to existing investors to connect him with their investor friends.
This was from July to October 2015, not the ideal time, he says, as most people were in holiday mode: “It was like herding cats,” he says.
Founder and CEO of Hiring Hub Simon Swan
In the end he gained money from 13 different investors for Lexoo, his London-based comparison website that connects businesses with lawyers.
The platform invites businesses to post a legal job online, which lawyers can then bid on and users choose the fixed fee quote they are happy with.
Pitching so many times meant van Binsbergen, originally from the Netherlands, was able to refine his style, changing the content of slides to answer questions that had been raised in previous pitches.
“You become more confident because at some point every single question that could be asked has been asked of you,” he says.
“In any other aspect of business you’re not told ‘no’ that often. I personally needed to get used to that to keep my energy up – and quite often they never actually said no, I had to deduce it.”
The costly nature of tech businesses can mean gaining outside investment is essential to get a venture off the ground or grow an enterprise.
So how can entrepreneurs ensure they have the best chances of walking away with the cash?
How to get in front of investors
Find out where venture capitalists hang out, says John Newton, chief technology officer and founder of content management platform Alfresco, which has a base in Slough and headquarters in California.
“If you go to a VC website you can see where some of the partners are presenting,” he says.
Daniel van Binsbergen of London-based comparison website Lexoo
“Check out what they’re talking about and what their interests are and, if there’s an opportunity, you could approach them to say you’re working on an idea without necessarily pitching to them.”
As van Binsbergen says, existing contacts are important and LinkedIn has made it easier for entrepreneurs to access those who can help them.
The planning process should involve looking at the panel’s interests and investment priorities.
“We can’t invest in a business that doesn’t match the criteria set by investors, but sometimes a management team will criticise us for that,” says Doug Stellman, fund manager at Manchester-based venture capital firm EV Group.
“It’s not good to get into an argument at your first meeting with a potential investor and doesn’t look good when we’re trying to assess an individual’s emotional intelligence.”
Before you pitch
It’s no surprise that preparation is high on the to-do list – after all, this could be the pitch that changes your life.
Simon Swan, founder and chief executive of Manchester-based Hiring Hub, an online recruitment marketplace, raised £250,000 two years after setting up his business and, later, a further £465,000.
Currently working on another round of funding, he says planning is important.
“The round we’re working on now we’ve been talking to them for 12 months in advance with conversational coffees,” he says.
“We’ve gone to these meetings with no intention to get money, just to update them on the business and how it’s growing.”
Before the pitch, know your market size and potential growth.
“Make sure you’ve gone out and found people who you think are the potential clients and ask if they would be interested,” says Simon Chadwick, director of Hub Strategic Communications in Altrincham, Cheshire.
“It’s getting some validation of your assumption so you can prove what a great opportunity this is.”
Chadwick has seen both sides, having raised money for a tech business in 2000 and as chief technology officer of a tech investments business in New York later.
Suggesting the investor visits your headquarters can also be useful.
Titus Sharpe, chief executive and co-founder of digital marketing and tech company MVF, in London, built up his company from scratch but sold a 40 per cent stake in 2005.
“I would definitely recommend a site visit,” he says.
“At MVF one of our big selling points is our world-class teams so it’s important that anyone investing comes to our offices and sees them first-hand and gets a feel for our company culture.”
Investor Richard Law, chief executive at Chester-headquartered identity intelligence specialist GB Group, agrees.
“I like to go to their place and speak to some of the people as well and have more than just the leadership team in the meeting,” he says.
The Lexoo website
When he invested in car finance group Zuto four years ago, a site visit was beneficial.
“As soon as I walked into their building there was an immediate buzz because of the enthusiasm and passion of the people,” Law adds.
How should you dress?
Views differ, especially because the nature of a tech business means you may not necessarily live in a suit.
“Dress as you would normally, I typically wear an open-neck shirt or a t-shirt and hoodie,” says George Burgess, who founded exam revision app Gojimo in 2009 while at university.
Now based in London, the business has backing from some of Europe’s top investors, including JamJar Investments, the consumer venture fund started by the founders of Innocent drinks.
“Definitely be yourself,” adds MVF’s Sharpe.
“No one in tech really wears a full tie and suit so it would seem odd if me and the co-founders turned up to pitch like that ¬– and I’m sure we would come across as uncomfortable, too.”
Others suggest researching how your potential investors are likely to look and mirroring their dress code.
“You want to be well-presented in an office environment and it might not look great if you look like you’ve been working on a building site – although if there are a group of you wearing hoodies with your logo on then you can explain it,” says Hub’s Chadwick.
“You only get one opportunity to make an impression so it’s about trying to find the middle ground.”
How long should a pitch last?
This depends on your audience. Gareth Williams, founder and managing director of Bristol-based Yellow Dog, has different versions of his pitch lasting one minute, 90 seconds, three minutes and five minutes.
Since it launched in January 2015, he has raised £1.2m for his business, a platform that harnesses under-used computer power and makes it available to 3D artists and animators.
“Whenever there was an opportunity to pitch, I pitched,” says Williams.
Chadwick says around 10-15 minutes is about right for any tech pitch.
“Try to imagine you’re having a conversation with them and the fewer words on a slide presentation the better – if you can find an image that gets your message across then that speaks a thousand words,” he says.
If you’re not confident at pitching, find someone within the business who can engage people, Chadwick says. Your “warm-up” person can then lead on to you.
Gojimo’s Burgess recommends ten to 15 slides, but adds these should be self-explanatory.
“It’s important the pitch deck is quite clear and gives a good overview – bear in mind it will probably be emailed beforehand and possibly shared internally or even externally, so the deck should be clear even without someone speaking over it,” he says.
How technical should you be?
Not at all seems to be the stock answer. “The way I do it is by starting with something intriguing, a hook that makes people want more,” says YellowDog’s Williams.
Investor Law suggests imagining you’re pitching to a relative.
“Google technology is amazingly complicated but, put simply, it shares the knowledge of the world with everyone in the world,” he says.
George Burgess of Gojimo
“If an investor’s mind is trying to process lots of complicated explanations they’re not really able to form a very clear view of value.”
Adam Gillett, senior business development manager at crowdfunding site Crowdcube, suggests starting by talking about the problem you’re solving.
“You need to give the value proposition because anything too technical can be alienating,” he says.
What should you include?
Have evidence of traction in the market, sales, customer feedback, awards and press coverage – “they’re all useful things in your arsenal”, says Williams.
“There’s a story that you’re trying to build so you need to say this funding will help us do x, y and z.”
Swan says you should give the “headlines of the opportunity”, but writing this should not be rushed.
“Six months before you need it you should think about putting that document together,” he says.
Effective analysis of similar businesses is also important.
“One of my bugbears is that I continually find that companies think too narrowly in terms of who their competitors are,” says EV’s Stellman.
He suggests your pitch should cover four areas: technology, market, management team and financial broadcast/business model.
A credible exit strategy can also be important, even if the business is early stage, Gillett says. This shows investors you are thinking about the future and indicates when they can get a return.
Though proof of customers or sales is important, it is possible to gain investment without. John Newton’s Alfresco raised £4.5m in its first round of bidding with just a product but no customers.
“It’s highly unusual to pitch for an A round when you don’t have customers but we had a track record,” Newton says.
What else should you know?
“Ask questions throughout – don’t leave it until the end,” says Newton.
He advises looking at body language to gauge how it’s going, while an investor taking lots of notes and drilling into your business model is usually a good sign.
The process is as much about you interviewing them as they are you, says YellowDog’s Williams: “You’re going to be tied together for at least three years so it’s very much about sussing each other out,” he says.
You need to be prepared to answer all manner of questions, so be prepared. Williams’ worst pitch was to a PE club in Bristol.
“I was tired, not on game and my answers were terrible,” he says.
“I just had an off-day, but because I’d met them a few months earlier I was able to redo it and it went fine, and we got the investment.”
While being too technical in your initial pitch is a no-no, it may be that an investor asks for a technical explanation later on, and you should be prepared to provide one.
Crowdcube’s Gillett says any pitch is just as much about the people as it is the product.
“Sometimes an investor can ask a spiky question and because an entrepreneur loves their business they might give a spiky answer,” he says.
Titus Sharpe CEO of the Marketing VF
“The best way to deal with this is to be upbeat and give a positive answer back rather than a negative knee-jerk reaction.”
This is especially important when crowdfunding, he says, as written questions and answers are seen by everyone who visits your page.
Law agrees, recalling a start-up that pitched to him.
“The managing director reacted very badly to being asked questions – he got very abrupt and shouty – and he ended the presentation by saying he wasn’t sure I was right for his business because I didn’t understand the model,” he says.
“Four weeks later he rang me up and said he really wanted me to invest.”
MVF’s Sharpe suggests treating the pitch like a conversation.
“People are buying into you as a founder as much as the company you are building so it’s important they feel like they are seeing the real you, and not just watching you reading from a script.
“Keep your delivery natural and make it more of a two-way discussion than a broadcast about your business.”
Although coming across as personable is a good thing, Newton advises caution after delivering his “worst ever” pitch to Welshman venture capitalist Michael Moritz, of Sequoia Capital, whose investments include Yahoo and Google.
“I had lived in Britain and I thought I’d build some rapport with him by talking about things in England and shared experiences,” says US-born Newton.
“He wasn’t having any of it though and he moved his finger as if to say ‘move it on’ – it was just awful.”
Despite this, Moritz became an investor in Newton’s previous business, Documentum, a content management platform.
What you should expect afterwards
Chadwick suggests closing your meeting by asking what you should expect next.
“It might be that your initial presentation was to somebody of medium rank and you might need to go back to speak to somebody more senior,” he says.
“Make sure you clearly understand the next step and get email addresses.”
When you next hear from them it’s a good idea to ask for feedback.
“I iterate my deck after every single pitch, updating it based on the previous meeting, to better answer questions or make specific points clearer,” Burgess says.
Gareth Williams of Yellowdog
“My pitching style hasn’t changed but importantly I better understand what investors want to know.”
The process can take from as little as a few months and EV’s Stellman has known some to take up to 18 months.
“It’s worth saying that raising money is all-consuming, it takes over and is at the front of your mind all the time,” says Swan, who says that during any funding bid he focuses solely on the process while his co-founder runs the business.
Hub’s Chadwick agrees you need to put the legwork in.
“I raised money in 2008 that required me to commute from Manchester to New York on a weekly basis for three months,” he says.
“While this is going on you’ve still got products to develop and sales to make.”