# The Changing Landscape of Fundraising: Pitching to Strategic Investors
## Introduction
In the ever-evolving world of startups and fundraising, entrepreneurs now have to adapt their pitching strategies to appeal to a new breed of investors. Gone are the days of traditional venture capital firms being the go-to targets for raising capital. Instead, strategic investors and corporate venture capitalists (VCs) have become the preferred choice for many entrepreneurs. This shift comes with its own set of challenges and opportunities. In this article, we delve into the changing fundraising landscape and explore the strategies employed by entrepreneurs like Sterling Pratz, the founder of Car IQ, when pitching to strategic investors.
## Raising Capital in the Good Old Days
If you’re old enough to remember the early days of raising capital, you might reminisce about loading up your 10-slide pitch deck and visiting numerous buildings on Palo Alto’s Sand Hill Road to pitch to potential investors. Sterling Pratz, the founder of Autonet Mobile, vividly remembers this experience. However, as times have changed, Sterling has had to alter his pitching approach and target a different set of investors: strategic investors.
## Simplifying Transactions with Car IQ
Sterling’s latest venture, Car IQ, aims to simplify transactions around the “big five” for cars: fuel, tolls, parking, service, and maintenance. To prove product-market fit, Car IQ initially focused on working with fleet vehicles that require efficient transactional processes. For instance, instead of each driver needing a company credit card, the car itself could automatically pay for its gas. Recognizing that strategic investors would benefit most from Car IQ’s technological advances, Sterling decided to pursue a different approach when it came to fundraising.
## The Steps to Piquing Investor Interest
Sterling has refined his pitching strategy to effectively capture the attention of potential investors. Here are the steps he follows:
### 1. Give Them the “Movie Trailer”
Rather than relying on the standard 10-slide deck, Sterling encourages entrepreneurs to condense their pitch into a shorter, more captivating format. He recommends creating a “movie trailer” pitch, comprising only three or four slides and lasting four to six minutes. By telling a story from the customer’s perspective, entrepreneurs can provide investors with an engaging experience that helps them digest the offering.
### 2. Put Yourself in a Box
To avoid confusion and ensure clarity during Zoom pitches, entrepreneurs should clearly define the relevant category their product falls into. For example, Car IQ could fit into fintech, automotive, or telematics. By explicitly stating the category, entrepreneurs save investors from the task of figuring it out themselves. This approach allows investors to focus on understanding the importance of the offering rather than trying to categorize it.
### 3. Provide More Detail
If investors express interest after the initial pitch, entrepreneurs can provide a more in-depth presentation during a follow-up meeting. This is an opportunity to share financials, technical details about the product or technology, and research on the competition. Sterling refers to this as a “partner meeting” where entrepreneurs can dive deeper into the specifics.
## The Advantages of Strategic Investors and Corporate VC
Sterling emphasizes the advantages of pitching to strategic investors and corporate VCs over traditional venture capital firms. Strategic investors, such as State Farm, Visa, Circle K, and Avanta Ventures, already understand the challenges faced by the industry and can immediately grasp the value of the solution. In contrast, traditional venture capital firms often require entrepreneurs to explain the industry and its unique problems, making the pitch more challenging.
## Tips for Working with Strategic Investors and Corporate VC
Sterling shares some valuable tips on how to successfully work with strategic investors and corporate VC:
### 1. Check Your Alignment
Before proceeding with any partnership, it is crucial to ensure alignment between your company and the strategic investor. Both parties should be working towards the same goals and driving mutual growth. If there is a significant disconnect, it may be best to walk away. Sterling advises entrepreneurs to focus on growth rather than merely fixing a problem.
### 2. Talk to the Right People
When engaging with a strategic investor, it is essential to meet with the venture arm of the company rather than solely focusing on corporate players. The goals and mindset of the venture arm are typically more growth-oriented and in line with what entrepreneurs seek in terms of investment.
### 3. Solve Their Problem
While your company may have the potential to solve various problems, it’s crucial to focus on the specific challenges faced by the strategic investor during the pitch. This targeted approach allows them to understand how your offering directly benefits their company. By tailoring the pitch to their needs, you increase the chances of securing an investment.
### 4. Keep an Open Mind
During meetings with strategic investors, it is essential to keep an open mind. Sometimes, they may approach you to gather ideas or explore potential collaborations. While this may initially seem alarming, it is an opportunity to showcase your expertise and establish a relationship. Sterling himself experienced such a scenario, where a strategic investor initially expressed interest in learning about the market but ended up becoming an investor.
## Don’t Oversell Yourself to Investors
While it can be tempting to promise multiple things to multiple investors, it is crucial to remain grounded during pitch meetings. Sterling advises entrepreneurs not to oversell their business to VCs. Instead, focus on clearly communicating what the company does and why it does it. Understanding the “why” behind your business helps maintain focus and allows you to attract the right support for your success.
## Conclusion
Pitching to strategic investors and corporate VCs has become a new norm in the changing landscape of fundraising. Entrepreneurs like Sterling Pratz have adapted their pitching strategies to target these investors effectively. By employing techniques such as the “movie trailer” pitch, emphasizing alignment with potential investors, and tailoring pitches to specific needs, entrepreneurs can optimize their chances of securing funding. As the world of startups continues to evolve, it is essential to stay agile and adapt to the ever-changing investor landscape.
