The Changing Landscape of Fundraising: Pitching to Corporate VCs
Introduction
Raising capital for startups has drastically changed over the years. Gone are the days of visiting multiple potential investors in a single day with a 10-slide pitch deck. Sterling Pratz, the founder of Autonet Mobile and Car IQ, understands this shift and has adapted his pitching strategies accordingly. In this article, we will delve into Sterling’s experience and explore his tips for pitching to corporate venture capitalists (VCs).
The Evolution of Fundraising
Sterling reminisces about the old days of raising capital, where pitch decks were the standard for investor meetings. However, he now employs a more effective technique to capture investors’ interest. Here are the steps he follows today:
1. Give them the “movie trailer”
Instead of relying on a standard 10-slide deck, Sterling recommends creating a short, captivating pitch akin to a movie trailer. This condensed version should consist of three to four slides and should last around four to six minutes. By crafting a story from the customer’s perspective, you are providing the investor with an experience rather than a monotonous presentation.
2. Put yourself in a box
Clarify which industry category is most relevant to your product during the initial meeting with an investor. For instance, Car IQ could fit into fintech, automotive, or telematics. By establishing a clear category, you help the investor understand your offering swiftly, especially in a virtual pitch meeting where interruptions may be minimal.
3. Provide more detail
If the investor expresses interest, request a follow-up meeting to deliver a more in-depth pitch. In this meeting, you can share financial information, product or technology details, and competition research. This is the stage where you present yourself as a potential partner.
Working with Strategic Investors and Corporate VC
Pitching to strategic investors or corporate VCs offers several advantages over traditional venture capital firms. Since they operate within the same industry, strategic investors are already familiar with the challenges, eliminating the need to explain the problem before discussing your solution. On the other hand, traditional VCs often require extensive education on industry nuances.
Moreover, when working with multiple strategic investors, Sterling emphasizes the importance of alignment without exclusivity restrictions. Strategic investors typically respect boundaries and refrain from requesting confidential information or imposing exclusivity clauses, making board meetings more manageable.
However, engaging with strategic investors may require patience since they may prioritize learning from you and testing ideas. To navigate this, communicate openly with investors, inquire about their stance, and prioritize projects based on customer demands.
Tips for Collaborating with Corporate VC
1. Check your alignment
Ensure that your goals are aligned with those of the strategic investor. If your directions diverge too much, it may be wise to part ways amicably. However, if both parties have a shared growth-oriented vision, explore the overlaps and leverage each other’s strengths.
2. Engage with the right people
When meeting with potential investors, focus on the venture arm of the company rather than just the corporate players. These venture arms are usually more growth-minded and can be a better fit for your startup’s goals.
3. Solve their problem
Tailor your pitch to address the specific challenges faced by the strategic investor. Avoid trying to tackle too many problems at once and instead concentrate on how your solution directly benefits them. Let them dive deeply into how your offering helps their company, allowing them to make their own informed decisions without feeling pressured.
4. Keep an open mind
Even if a strategic investor initially appears as a potential competitor, remain open-minded. Sometimes, they are genuinely seeking market insights and ideas. By fostering an open and transparent dialogue, you might find that they eventually become investors themselves.
Avoid Overselling Yourself
While it may be tempting to make grand promises in an effort to secure funding, Sterling warns against overselling your business. Instead, focus on clearly explaining your company’s purpose and mission, ensuring that investors understand the why behind your business, not just the what. This approach keeps you grounded and enables you to attract the right support for your startup’s success.
In conclusion, the landscape of fundraising has evolved, and pitching to corporate VCs offers distinct advantages. By creating captivating “movie trailer” pitches, ensuring alignment with strategic investors, tailoring your pitch to their specific needs, and maintaining an open mind, you can navigate this new era of fundraising successfully. Remember to stay true to your company’s vision and purpose, and you will find the support you need to thrive.
Disclaimer: This article is based on an interview between Nathan Beckord and Sterling Pratz on an episode of Foundersuite’s How I Raised It podcast.
