At the end of the year, I was honored to be included in Mattermark’s list of “VC’s You Should Pitch When You Fundraise.” I love meeting new entrepreneurs and being helpful to them when I can. Even if the conversation doesn’t culminate in an investment from Polaris Partners, I try to offer sound counsel to keep teams on track towards the end goal. These first time discussions are even more rewarding if founders are prepared to present the opportunity comprehensively and in the very best light. Investment criteria vary by firm, but here are five elements I prefer to talk about when sitting down with a founder:
What’s the Pain? Off the bat, I want to know what pain point your product or services is addressing. Even before hearing about the product or your team, I like to get a sense that a real problem exists and that your customers are willing to take action to make go away. Potential investors will be more interested in hearing the rest of your story when you establish that there is acute and urgent pain, with motivation to eliminate it ASAP. The more obvious the pain point, the better. We like to say that the best opportunities come from “bleeding from the neck” pain.
Aspirin or vitamin? Once there is buy-in that a problem worth solving exists, I now want to learn about your product or service. Specifically, why do customers to desperately need your product to relieve their pain? This is your opportunity to show that your solution is more like an aspirin than a vitamin. It shouldn’t be something that’s “nice to have” but difficult to convince people that they need it daily. You should be prepared to explain how your product is the fast acting pain reliever, and more importantly, how is it 10x differentiated in the market. Also tell me what’s defensible going forward, to prevent fast followers.
Who’s Hurting? This is a question of market size, yes. But I am interested in more than just large numbers. While many may suffer from a similar problem, what is the demographic that is most likely to become your customer and how do they behave? Where will you start in terms of acquiring market share – and why? A huge market opportunity is only impressive, if you have a plan to penetrate it. Boiling the ocean is rarely successful.
Why now? When it comes to innovation, timing is crucial to success. What is happening in the world that makes solving this problem possible TODAY. Are there macroeconomic developments or technological advances that make the timing right? Be sure to make the case that you are not too early, but also don’t position the idea as yesterday’s news. Presenting your concept as a hybrid of an existing success (i.e. “it’s Uber for pets”) is a red flag that you are behind the curve. Tell me something that I’ve never heard about before.
Getting to Market. Even if you have the silver aspirin for the most acute pain suffered by a large market, no one will know about it unless you have a scalable go-to-market strategy. I wrote about this element here but the key is to have a plan that includes virility and leverage. Winning a customer is great, but it’s even better if that new customer can bring you even more prospects down the line.
I love diving into all of these elements in my conversations. It not only gives me a good sense of the product and market opportunity but it also allows me to get a feel for the most important element of all – team. Investors need to have confidence in the folks who are going to execute on the opportunity ahead. Having founders who have thought through these elements demonstrates their ability to think strategically. If you are able to make me understand the pain and its remedy, it will always result in a robust discussion and yield insight for your team.
This post appeared originally at LinkedIn Pulse on January 11, 2016.