Pitching a VC? Here’s some advice: Pitch your business model. Your idea, your product, and your team is the supporting cast.
A VC has a bank account of cash. Their job is to find the best return for their investment. They can leave it in the bank, invest in GICs, or bonds and get a 2-3% return. They can invest it in the stock market and lose half of it (he,he). They can buy a McDonald’s and get a 18% – 24% return. OR… they can invest it in a high-growth business.
So your starting point is to outperform a McDonald’s franchise – or any other franchise.
Then you have to beat every other type of small, high-growth business… in the world. You have to present a business model with potential returns that beat oil and gas extraction, construction, advanced manufacturing, and alternative energy.
So your business model has to be that good.
Then, assuming you’re in technology, you now have to have a business model that is better (higher potential return) than any other technology-based business in a similar stage as you… in the world. For example, if you have a file sharing site, your file sharing site has to have a superior business model than image sharing, social networking, collaboration, instant messaging, daily deals, e-commerce, blogging, video streaming, dating, micro-locationing, gaming, exercising, tooth-extracting companies.
Your competition is other business models.
When you’re pitching a VC, you’re actually pitching a model that is better than any other model where they can invest their dollars. It’s not the other file sharing site.
The other slides – your team, your product, your go to market just demonstrate that you will be able to actualize your business model. But without the right business model, none of that matters*.
So before you do another pitch, spend a lot of time on your business model. It better outperform a double Big Mac!
*You often hear about ex-googlers and other great teams getting funded. It’s almost the same premise… there’s an expectation that they team will “figure out” a business model, that they have inside information about tech holes they can fill, or can likely get acquired for their talent