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October 24, 2022
How VCs Evaluate Risk When You Pitch
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Congratulations, you’ve landed a VC meeting! Now is your chance to showcase why you’re the next best investment for this firm and secure the much-needed funds to scale your business.

It can be difficult to distill your story and convey all the right information during a pitch. Meetings go fast and founders often fail to acknowledge the critical risk areas that VCs are looking for in a pitch presentation, which crushes their chance of securing funding.

To help you overcome this hurdle and address the most important details in your pitch, here is what investors want to know about your risk areas.

 

9 Risk Areas to Cover In Your VC Pitch Deck

Investors assess a common set of risk factors when deciding whether to invest in your startup. Be prepared to cover these nine risk areas during your VC pitch meeting:

CEO

The largest determinant of a startup’s success is the CEO. Why are you as the founder and CEO passionate to wake up and solve this problem every single day? What unique insights do you have that give you an unfair advantage to solve the problem? The best founders have experienced—either directly or indirectly—the pain point they’re solving and have deep customer empathy as a result.

 

Team

Investors are investing in both the idea and the team that executes it. Emphasize the strengths of your team, and demonstrate that you can you recruit A-players. During the pitch, show that your team is aligned and harmonious. Avoid fighting or squabbling, which could suggest there is turmoil within your team.

 

Market

A lot of companies can raise $15-20 million, but they have trouble scaling from there. Demonstrate that you have a large market on the right side of history.

 

Product

Why will the product actually work? What problem does it solve, and why do customers love it? If possible, show early data points like NPS and CSAT scores, as well as early customer quotes to showcase why your product will succeed.

 

Customer Attraction

An idea is one thing, but getting a customer to pay for the good or service is another. How will you efficiently acquire customers over time? Can your brand drive free word-of-mouth? Consumer companies, for example, should be mindful that paid social media advertising gets more expensive over time. Do you have an angle to offset this?

 

Competition

The best founders have a strong grasp on the competitive landscape. Saying that “there is no competition” creates skepticism. Point to indirect competitors or substitutes to demonstrate that you have a deeper understanding of the market.

 

Know Your Metrics

Know your metrics! Not knowing basic KPIs is an easy way to reduce credibility right out of the gate. Investors want to know that you are living and breathing the business. Figure out the most important numbers for your business and have those memorized. Having these key numbers at your command will convince investors that you know about your business. On your P&L, don’t be overly conservative about how big your business can get. VCs will haircut whatever numbers you provide.

 

Financing Risk

How much money will you need to raise to get to the finish line?

 

Exit Risk

Who will actually care about the business you are building, and will it become a public business one day?

 

Be Confident and Stay Open

In the end, a crucial ingredient of a successful fundraise is appearing confident that your company will grow and be successful. Investors want to get on the train when they think they’re going to miss the train, and the nine areas explored above will fully explain how your startup is built to last.

 

To help you even further tailor your presentation, read through these tips for thinking like an investor when structuring your VC pitch.

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