Three steps to winning the hearts and minds of VCs

 
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Read on for a handy how-to guide for sustainable startups seeking investors.

There’s no shortage of advice out there when it comes to pitching your company to would-be investors - some of it truly worthwhile, and some of it off the mark.

Most comes from Silicon Valley, where a plethora of SaaS and mobile offerings pitch on the daily as they vie to be the next Uber.

While the tech mentality has a lot to teach all companies across the spectrum (we all hope for Uber-sized success), there are industry-specific considerations - and advantages - for startups operating in emerging and sustainable industries.

We’ve put together a simple 3-step guide to those considerations to help you craft your approach to investment as you seek capital, to show off your best side, and ensure you leave a lasting impression once you’re invited to the table.

Step 1: Find the right investors

Even if you have an amazing story and save-the-world potential, investors aren’t just going to flock to you (sorry if you’ve been waiting by the phone for the producers of The Dragon’s Den to call).

It’s on you to find them. But not all VC portfolios are created equal - and associations, affiliations and relationships matter. Researching the right ideological fit is key to unlocking a great VC partnership (and getting your foot in the door). You want to be in good company when it comes to who you’re pitching to.

If your innovation is cleantech-related, you may not want to approach VCs with fossil fuel investments. If you’re an ocean venture, you’d probably want to steer clear of VCs whose portfolios feature disposable plastics manufacturers.

If in doubt - start by exploring a database. The Canadian Venture Capital and Private Equity Association publicly lists almost every member in its director by sector and industry - so you can filter for venture backers whose portfolios include companies like yours.

Don’t overlook Government-sanctioned or run programs while on the hunt for financing. The funding opportunities may be limited depending on your industry or offering, but with a mandate to fund environmental projects and enterprises that make a difference, the Canadian government could be one of your first backers.

Canadian Government Funding Support Organization Mentor Works lists a number of financing programs small to medium-sized businesses can access, including the green-friendly Build in Canada Innovation Program.

If you have an offering the Canadian government might use, the BCIP could be your best bet. It helps pre-revenue startups convert innovative technologies into commercial products, offering up $1,000,000 in revenue by way of a contract - through the BCIP, you’d be securing a government department as your first buyer.

Canadian Environmental’s website, launched in March 2001 as a free resource for environmental professionals. It has a long list of Government resources and funding that green startups might also find useful.

Even better, find a startup supporter like the MaRS Discovery District Venture Services, which can help startups in the environmental sector access grants and funding, and attract seed capital through its VC associations. Or Nova Scotia’s Innovacorp, with an eye to transforming the Atlantic Canadian region into one of the world’s top 10 startup ecosystems through early stage venture capital - specifically for life sciences sectors, and clean and ocean tech.

If your inquiries or emails to these organizations are going unanswered (don’t fret - it’s not a sign of your potential but a sign their inbox is already overwhelmed), consider a less direct approach and ask for a referral. Mark Suster - a VC himself and founder of Upfront Ventures - has crafted a helpful (and practically exhaustive) list of connections that might get you an introduction, here are just a few of his ideas:

Start-up oriented, corporate lawyers - these professionals can often be found on the phone to VC firms, since incorporation and/or negotiating stock option plans are among the first needed tasks in a deal flow.

Start-up focused recruiters - they know everyone! And the best ones are already working with the best VC-backed organizations.

Through their portfolios - great VC companies often publicly promote their successes. What better way to reach a potential backer, than to network with other green companies she or he has already backed?

Step 2: Craft the perfect pitch

We don’t have to tell you the pitch is key. It’s how you unlock funding and recruit important business clout and personalities to your cause. It’s all about the story - and of course, the perfect pitch deck (with a well-rehearsed delivery).

We’ve worked with countless sustainable startups on their pitch decks and we’ve even built our own. Truly great ones get potential investors excited and engaged in the conversation. The not-so-great ones... well, you can imagine (listen to one of our favourite podcasts, The Pitch by Gimlet Media, to hear real world examples of pitches unexpectedly going in the opposite direction from what entrepreneurs intended - and also some great constructive feedback from VCs).

There are plenty of templates, resources and formulas floating around online to help you craft the perfect deck - but ‘Get Backed’ is an industry standard that will give any startup a great set of takeaways. The format is simple, with just 10 slides needed to generate that valuable spark of interest:

The Overview Slide: Otherwise known as the ‘what-if’ slide, or the ‘big idea’ slide. Sustainable businesses really have an advantage here - we’re saving the planet! Let’s tell them about our origin, or aims and why our plans should inspire them - saving the planet is great business, but no one will care about a company that’s in it just for the money.

The Opportunity Slide: In the eco-business sector, technology is advancing so quickly that we tend to see a lot of solutions in search of a problem. Example - efficient or eco-innovations born in R&D labs that show promise, but have a wide spectrum of potential applications. Perfect, right? But without a market need that’s current and persuasive, you might have an idea trapped in a vacuum.

Problem: It should go without saying that once you find the problem, you should be able to illustrate and breakdown its specific pain points.

Solution: explaining your solution isn’t as important as explaining why no one else has offered anything like it yet. What’s unique about your product or approach? This is the one slide that should NOT focus on your unique greenness - your eco-benefit is just a bonus.

Traction: When you’re at the concept without an execution, you’re at the toughest stage from which to give an effective pitch. The hardest part of any business is in the execution. VCs want to see you’ve proved out and validating your concept - meaning you can demonstrate pilot traction, growing interest and even early sales.

Customer or market: This is where you show off your research talents. Find some interesting ways to represent your market - don’t just tell VCs there’s a buyer out there for your product, paint them a picture. How big is this market? Who’s your ideal customer and what is his or her spending power? If you can prove you know who, what and where this customer is, you can build VC confidence in your ability to sell to them.

Competition: It goes without saying that companies on the cutting edge - especially companies with new technologies or applied innovation, are often out there in a green field without many to challenge them. But you’re always competing against someone or something. If it’s not direct competition with another brand - it may be perceived or behavioural. How does your target audience CURRENTLY solve their problem? How can you change their routine, or ensure you can carve out a space? How are you not just different, but the winning choice?

Business model: Otherwise known as the money slide - the most important slide in the deck. It’s not enough to have a great idea, you have to have figured out how you’ll profit from it - and that means having calculated your margins and your projected revenue - how do you plan on scaling, when will you be profitable and what’s the upside? Yes we’re saving the planet, that should be enough, but altruism without profit is just volunteer work - don’t overlook your business model.

Team: Don’t just include another flip-past-it bio of your founding team, show prospective VCs that you have the bases covered (operations, business development, finance), and tell them what makes your team, your experience, and your perspective unique.

The ask: Finally, be clear about why you’ve made the pitch in the first place. Tell VCs exactly what you need (and what they get out of it).

Sounds simple enough? Yes, but the most important thing about your pitch isn’t formulaic - it’s the feeling. Storytelling is an art, and the story you weave is the sum of all these parts. Yes, your ducks must be in a row with the ‘meat and potatoes’ part of your pitch, but the story must ignite a VC’s imagination and leave an impression that’s tough to forget.

Our advice? Try to destroy your pitch before you ever make it. Practice in front of trusted colleagues and ask them to be harsh with their critique. Don’t be afraid of feedback; every negative reaction is an opportunity for improvement. And don’t forget the importance of great design - hiring a consultancy like ours to help you craft and deliver a strategically laid-out deck underscores your credibility and can give you an edge over everyone else making a pitch that day.

Step 3: Let your offering - and your customers - speak for themselves

The best possible argument you can make for the viability of your business is the one your customers make for you.

If you sell a service, get some feedback from a trusted test audience. Shoot an iPhone video of their reactions and edit together a few short clips to show your VCs. Even if you’re pre-revenue or you don’t have a prototype, you can simulate your product or service (and the outcomes). Bring testimonials. Show people actually using what you offer the way that you intend.

And if you can let prospective VCs try / see / smell / touch and/or taste what you’ve been working on - even better! Bring your physical product to the meeting. You’d be surprised how many well-prepared startups forget to bring their actual prototypes to a pitch. Or why not prepare a hypothetical a case study of how one the businesses in your target  could benefit from your service? Your pitch can really benefit from doing a little homework like this.

By giving prospective VCs a tangible feel for the product or service they’re investing in, and by showing them real applications and positive reactions, you're painting them a picture of a world with you in it - and hopefully - giving them a concrete sense of possibility and potential.

And what generates more excitement than a sense of possibility?

 


How much capital are you hoping to raise your sustainable idea?

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