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Raising venture capital is an infamously tricky task. Thousands of startups pitch VCs each year, hoping to receive the funding to help turn their dreams into reality. At the top firms, only 0.7% of companies receive the funding they seek.
With so much at stake and such long odds of success, founders constantly search for ways to improve their pitches. Unfortunately, this often leads them to learn and follow conventional wisdom, much of which is outdated and ineffective.
This article will explore three sources of conventional wisdom that entrepreneurs should approach critically.
Related: 3 Ways to Raise Capital and Take Your Business to the Next Level
1. Pitch templates
Industry giants like YC, Sequoia Capital, and numerous other companies and individuals alike have shared similar pitch templates since the early 2000s. These pitch templates often follow the same pattern companies like Dropbox and AirBnb used to present their early ideas before becoming billion-dollar businesses.
The problem with using pitch templates is multifold.
The best analogy for a pitch template is riding a bike with training wheels. While you are less likely to fall off the bike, you also won’t be winning the Tour de France — the problem with using training wheels when fundraising is that it limits your potential. With only 6.7% of the inbound decks to major funds being seriously considered for investment, the standard for your deck can’t avoid complete failure; it needs to outperform your peers.
The power of a pitch template is that it ensures all the aspects of a business a VC needs to familiarize themselves with before agreeing to a meeting are covered. You’ll never have a severe deficiency in the content of your deck. The tradeoff is that you remove the creative freedom required to craft a compelling deck. Instead of building a narrative for your business, placing the most impressive slides early in the deck and ensuring continuity between slides, you are forced into presenting dry information in the order recommended by the template.
The prevalence of pitch templates also compounds this issue. It limits your ability to tell the story behind your company and forces you to present your information in the same manner as thousands of other founders. If your goal is to stand out from the crowd and show that you deserve to be in the 0.7% of companies that receive funding, using a pitch template moves you away from that goal. A pitch template blends you into the crowd. The moment investor sees your deck, the familiar look, feel and story will strongly signal to them that you belong in the 99.3% they ultimately reject.
Related: 10 Reasons Your Capital Raising Strategy Is Failing
2. Pitch anything
When Oren Klaff published Pitch Anything in 2011, it was revolutionary. The methods in that book have underpinned the last decade of pitching theory, practice and study. Unfortunately, since then, the market has adapted. Venture capitalists have seen the “Pitch Anything” format used for the past 13 years and have adapted, but entrepreneurs have yet to respond.
A typical example I’ve observed is founders turning away VCs, ignoring emails, claiming they don’t see a fit, criticizing VCs online and using similar techniques to try and establish status and prevent a perception of neediness. When these strategies were first employed over a decade ago, they worked for founders.
A decade ago, the ideas in the book were known. It was standard practice for entrepreneurs to value the time of VCs above their own, to beg VCs for money. This is why the founders who had the confidence to stick to their terms, run deals on their schedule and demand the respect of VCs stood out. Following the advice in the book was a significant differentiator that helped founders raise.
Today, these tactics are well known. Most founders understand the need to create a feeling of exclusivity and a fear of missing out on their business when they fundraise. The issue is that the ways that companies can establish that type of exclusive status today are not the same as they were a decade ago. In a world where everyone is using the same playbook, all trying to pretend they don’t need venture capital, rejecting a VC no longer makes them want you more; it simply costs you the deal.
If you want to succeed at creating exclusivity around your company, you need to use new strategies adapted for today’s fundraising environment. The best application of these tactics I’ve seen recently are companies that can build momentum and use it to raise quickly. Elon Musk is an expert at implementing this strategy. From Tesla to X to SpaceX, his capital raises are often accompanied by a significant launch, positive announcement or other catalyst event. Raising capital at a time when there is genuine excitement around the business allows him to establish status and differentiate himself from other investment opportunities.
Related: How to Raise Funds As a Startup
3. Venture capitalists
Venture capitalists love to give founders advice on how they can improve their pitch. This advice is problematic because it isn’t generally beneficial to entrepreneurs. Instead, the advice attempts to convince the entrepreneur to present the information in a manner that is most beneficial to the venture capitalist.
The hard fact is that the interests of the VC and the entrepreneur are opposed. In an ideal world, VCs would want you to present raw data, pure facts upon which they could make the most rational investment decision. As an entrepreneur, you need to sell your story. Deciding to start a business from nothing and attempting to grow it into a billion-dollar enterprise, an endeavor with a high likelihood of failure, is inherently irrational. Your objective is to sell yourself, your story and the opportunity, not a rational investment.
A simple example: the most common advice I hear from VCs is to continuously add more information to your pitch deck as you talk to VCs. Many of them will have questions, and when one asks a question, you should ensure the answer is in the deck before you speak to the next VC. Why might this be their advice? They want as much information as quickly as possible. They also don’t want to forget to ask a crucial question whose answer made others pass on the investment.
Following this advice, however, could drastically decrease your chances of raising capital. A far better solution is to build a database of questions that VCs ask you, prepare answers in advance, and then prepare the perfect answer when you get asked the question. Now, you suddenly keep a simple deck with a strong narrative and can easily navigate the questions you’ll receive after your pitch. It is a far better outcome than the clunky, data-filled pitch VCs recommended, followed by unforeseen (likely poorly answered) questions.
