Selling Investors: Pitching Tips from Flybridge Capital's Jeffrey Bussgang by Carol Tice | Tuesday, February 8, 2011
Selling Investors: Pitching Tips from Flybridge Capital's Jeffrey Bussgang
By Carol Tice
Entrepreneurs put a lot of energy into finding investors who might fund their business. But many aren't really ready with a solid pitch when they finally get in front of investors, says Jeffrey Bussgang of venture-capital firm Flybridge Capital, who's author of the new book Mastering the VC Game – A Venture Capital Insider Reveals How to Get From Start-Up to IPO on Your Terms.
To start off, many entrepreneurs only think they'd like big venture investors, but they're not really ready to cede some of their power, Bussgang notes. These situations can have unhappy endings.
For instance, Zappos founder Tony Hsieh recently wrote a book, Delivering Happiness, which relates how he ended up selling his highly regarded startup to Amazon.com last year, when he really wanted to wait and stay a public, standalone company. Long story short: he raised so much venture capital, his investors dominated the board, didn't like his efforts to cultivate a customer-service-driven culture, and made him feel trapped. He eventually realized he'd have more freedom under Amazon management than he did as a venture-backed company.
Not all entrepreneurs understand what taking on investment really means – usually a three-to-five-year growth tunnel, at the end of which they'll likely need to sell the business, merge with another business, or go public in order to cash out their investors. It's the rare business that can figure out how to give investors their return while the business just keeps rolling.
Also, Bussgang says, many haven't examined whether they'd feel OK about being shunted down to a chief marketing officer or chief technology officer role, while the investors bring in a more seasoned CEO they trust to drive growth.
"It's very rare for the founding entrepreneurs to be in charge from beginning to IPO," Bussgang notes.
So, before pitching…really think about whether private investment is for you. If it is, then really work on your pitch! I've heard too many stories of companies that show up in investors' offices with nothing but vague claims of huge market potential – no projections, no financials, no solid growth story.
Jeff tells a couple of hilarious pitch stories in the book – one about an entrepreneur who got a deal, and one who didn't.
In the first case, the company founder made a quick pitch, then turned the meeting over to an underling. Then he began calmly clipping his nails. Oddly enough, this impressed the VCs – clearly, this guy knew how to delegate, wasn't on an ego trip, and believed in his team. The company got funded.
The second case involved an entrepreneur who felt compelled to bring his dog to his pitch meeting in a glass-enclosed conference room. Midway through the meeting, the dog sees something in the hallways and tries to race out, slamming into the glass and getting knocked out cold.
The entrepreneur completely dropped his pitch as he keened over his injured dog. "My Sophie!" he wailed. Then he picked the dog up, left, and never contacted the firm again, Bussgang relates.
"He never even called to apologize, or follow up later," he says.The Microventures Marketplace may provide a useful new approach for entrepreneurs who don't want to risk the perils of taking on traditional, big investors, or who don't feel they excel at in-person pitching. Now, there's another option – presenting your company online to a large group of smaller investors, who can band together to invest in a startup.
About the Author:
Carol Tice has written for Entrepreneur, BNET, The Seattle Times, The Puget Sound Business Journal and many other publications.