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How to present your startup to VC

03/09/2011

Anna Chebotareva (A.Ch.) My name is Anna Chebotareva and this is a program “Have an idea”. Today we are going to speak on how to present your startup to VC. My guest is Alena Popova. It’s difficult to count the amount of areas she is operating in, so it would be better for Alena to introduce herself.

Alena Popova (A.P.) My main project now is StartupAfisha – a single project to unite all of the startup-community. Starlook.ru project – a social shopping-platform – leader in that niche. We are going to update it soon and I’m really glad about it. Charityfair project – a charity project for children and positive news in that area. Gov2project.ru – a single entry point for eGov startups. And a list of other services. Now I’m positioning myself as an entrepreneur (doing my business by myself) but I’m not a CEO of that services. I  travel a lot looking for startups, doing public announcments and developing Gov2Project, eGovernment and eDiplomacy and eOfficial areas.

A.Ch.: I believe that none of our audience will not have doubts that with such a large amount of projects Alena is a perfect candidate to answer the “How to present your startup to VC’s” question. You are saying that you are not in charge of managing your projects…

A.P. I’m managing financial and law objects but I’m not in charge of personnel and tactical tasks.

A.Ch. I’m sure that successful entrepreneur who “has grown” to a VC or an Angel had his own list of mistakes that could be avoided by young entrepreneurs.

A.P. I’m presenting a lot of projects to investors (as an entrepreneur) and most of mistakes are always the same. You shouldn’t say that your project is the best because it’s not true. You need to talk more general– that your project addresses specific problem. That your project responds to marketing challenges. You should know the market capital capacity and opportunities. When you are asked on the market you’d like to occupy you should answer in values but not in the market percentage. For example you know that cosmetics market worth $6mln and you should say that you want to occupy the share of 10% which is $600000. So the investors would understand that you are serious about your startup.

A.Ch. But sometimes it’s quite difficult to understand the market value and the share you could take.

A.P. Of course you are right but anyway the entrepreneur must understand his market approximate capacity and the VC would understand that you made some research. We have an animation studio VideoSnack – content provider for mobile TV. We sell content in 12 countries and we even won the Cannes Short Movie Content Award. When I came to somebody with my content they usually said that there were no mobile tv market and I told them my thoughts and my approximate calculations. After that they started to believe me, because they saw that I made some research and I knew the market rules and could announce the value of my project. So it’s safe to invest money into me. It’s not safe to invest into somebody who even unable to announce their costs.

A.Ch. So as you say, before you visit your potential VC it’s worth to talk with your customers, or Business Angels or some experts?

A.P. Yes, of course.  But that conversation is more theoretical. For example, I would rather invest into bright-eyed and bushy-tailed entrepreneurs. But sometimes these people may not understand the characteristics of the market but I need to know that they are a good team. Anyway most of the VCs invest into the team.

A.Ch. OK, so you came to the VC and you tell him which issue your project solves, you know your market well, you could tell everything about your team.

A.P.  From  my experience they often ask about the team, if there were any successful stories or fails in the team? Because these are the practical cases for investors. It’s really difficult to run your business with your friends. And as they say “Better not business founded on friendship, but friendship founded in business”.

A.Ch. So, you need to tell everything about your team why you work together and what each member’s value. While presenting your project it’s worth naming the similar project to the VC so he would be able to understand that your project is better.

A.P. This is the main idea. Last year when I visited Silicon Valley my first lesson was “Elevator pitch course”. And while speaking of analogues we were given an example that “YouTube is a Flickr for video”. So while elevating to investor with such a simple example you could introduce your project in just a few simple words.

A.Ch. Great! So we could say about Skolkovo – Russian Silicon Valley. Business school Skolkovo – Russian BRIC countries oriented Harvard school.

A.P. When you introduce your project in just simple words you need to use well-known analogues. If there is no such service you need to explain what it is like “Labor exchange for projects”. But it must be a short statement about your project.

A.Ch. Speaking of charisma I would like to remember Steve Jobs and his great presentations. Few people know that this man does a lot of rehearsing in front of a mirror before he goes on stage for his consumers. Could you please tell us something about pitch preparations?

A.P. I’m an impromptu person and it’s easier for me to meet an investor in an elevator with my pitch then to come up with a learn by heart speech. But a lot of great speakers do a lot of rehearsals and most of the entrepreneurs need to prepare and rehearse their speeches. You couldn’t sit and wait in front of investor waiting for his response. So you need to speak about yourself. My name is Alena Popova and I think that this project is exactly for you because I already made this and that and now I could do those better and so on. In that way anybody even in Russia would invest into you.

A.Ch. Arcady Moreinis told about charisma “It’s hard to explain the product without charisma to investor. When I see a person similar to me I start to work closer with that person”. Tell us something about inexcusable mistakes to entrepreneurs.

A.P. You shouldn’t come with a “crowd” to introduce your project. When you come in team of three or four the VC would get lost in the flow of your thoughts. But when just one speaks and other three just sit around he wouldn’t understand what all of them are doing there. Are they his bodyguards or what?

A.Ch. Should they tell you their previous fails?

A.P. Yes, of course. It’s your experience. And even if you fail in the first time your second project might be successful.

A.Ch. It sometimes happens that you are working on something and you are trying to start another project. Should you say that you run something else apart from that project?

A.P. When I started my first project I had a job. In my team there were people that were working on their own projects. But recently I was speaking with a CEO of one of my project and he told me that they asked him to start another project. And I didn’t like it. You have to have a straight focus on your project. I’m not able to be a CEO of all my projects because I don’t have time for that. I’m developing the business. A CEO must focus just on his project. It is normal if you have a job and starting a startup but VC wouldn’t like it and I don’t like it too.

A.Ch. Is it important how you are dressed up?

A.P. No. It’s more important how well-groomed you are. If you have unwashed hair or dirt under your nails unfortunately it is important. Well-dressed entrepreneur could arise some mistrust. If you have an expensive watches and you ask for money to invest in your project it is raising the risks in the mind of a VC like is that project a toy for you or a hobby?

A.Ch. So it doesn’t matter how you dressed up but you have to take a shower.

Let’s speak of business rivals. In my interview with Phil Libin — CEO of the Evernote he said that they couldn’t allow themselves waste time researching their rivals. They would better spend this time to make the project better. So should the entrepreneur research and know his competitors?

A.P. I think that you should know your competitors in the first stage of your project in order not to reproduce their mistakes. On other hand – I had a partner of my Starlook project who spend 4 hours a week to know his competitors so he would able to develop his project in the right way. You need to do that in unformed market. Social shopping market or eCommerce in Russia is still unformed. If you want to play on that market you need to understand it and constantly research it.

A.Ch. Should you understand where the VC is investing in?

A.P. Yes of course. It is very good if you know the VC history and understand him. It’s raising the loyalty bar. And either not investing in you he could provide you with a useful contact. Before my visit I always do some preparations to know the investor better.

A.Ch. Alena is going to become a Business Angel in Lift Project soon. Thank you very much and hope to see you soon.

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