Founders selling the opportunity to invest in their companies should do it wisely. Every single business has a lot of sh*t under the cover and when founders are highlighting only the positive side of the business it smells bad.
Fake.
I discovered a great approach to present companies to relevant VCs and want to share it with you.
Fake.
I discovered a great approach to present companies to relevant VCs and want to share it with you.
I use several documents to introduce the company to the GP of the fund.
Investment memo. It helps the team of the investor to jump into the opportunity without spending additional time for research. Sometimes the memo is enough to close all questions, sometimes it raises more questions, but they already know where to dig, which questions to pose. I first learned this format when presenting my first deal to a syndicate of investors. My first memo was not great, but I learned that there are so many variants on how to draft the memo. Some VCs prefer to see it the way that you are sharing charts and tables and describe them. Other VCs prefer to see the long read, 7-15 pages where you describe all the little details of the business, Intro (background, product and price, milestones, funding criteria and usage, previous investors), market, product, customer traction/feedback, timeline/financials/fundraising, team, competition, summary. Recently I met a founder who does this job himself saving a lot of time for VC and getting extra points.
Pitchdeck and One Pager.
If you’ve seen a lot of great pitchdeck examples in your life and obviously poorly designed, messy pitchdecks with a lot of text and useless information instead of traction, team, product description, the very ask. One Pager is the marketing material which summarizes everything and highlights the best takeaways you need to remember after reading it. I always create the one pager for companies which I am working with myself. I think that I have great sales skills, and I know what VCs usually look for in the One Pager. So this document is always up to me. I have my background as an owner of a tech recruitment company and I always looked into cover letters. This is absolutely the same but not for candidates, but for Founders. The only purpose of sending one pager for investors is to get him on the call with the founder. One Pager is getting founders the opportunity to actually pitch the startup and meet with the fund’s team.
My note. I count myself as a good investor. Even though I just started my career in VC. I didn’t lose much money yet, and I am making 2X within half a year on my VC investments. I want to share my real note for the company I am working with right now and my comment, what is the purpose of the note.
I usually start my note with the company history. It gives an experienced VC the 360 perspective on the company.
Company History:
Initially they were focused on cybersecurity forensic, helping corporations to counter disinformation campaigns in social media and detect coordinated activities. They learned how to filter professional conversations from those which were created by influencers and bots to manipulate the public opinion. At this stage they were supported by some angel investors.
Later they understood that to build a solid business they need to target the big market, which is the Finance market. At this stage they pivoted to provide Social Media and News investment analytics and were supported by Wahed Ventures and 8X Ventures (both are related to GCC Region).
Since January 2024 they have been generating revenue from 6 b2b clients that are using their data to feed their algorithmic investment strategies and risk management. Business model is yearly subscription (starting from $50k/year), as right now they are releasing the second product and already closed one upsell. 20% of the clients in current portfolio and in the pilots are local, 80% are international from London, US, EU and Asia.. Pessimistically they can close it at 300k ARR, from the current pipeline, realistically they are aiming for $1M ARR by the end of 2024.”
Now when VC learned everything about the company history I always share my vision on why I chose this company to present to him.
What I like about the company:
The tech team. I know some of the AI PhDs in the team from my own first steps as an entrepreneur since 2016- they were already very successful data scientists, sophisticated in their skills in the financial industry working for market leaders with unlimited budgets.
I think the market is huge, there are 30 000 hedge funds in the world, 137 000 regulated mutual funds and around 27 000 PE/VC funds. The company has all chances to grow to several hundreds millions dollars in valuation if not a unicorn.
I like the approach they take with clients, they ensure their data contains Alpha and let clients to test it and after that they charge them a relatively big check. They invest in relationships with clients and that is why they expect to extend all contracts and upsell new data products in the 2025.”
This paragraph I love to write the most. I always see gaps in the business or challenges. Sometimes I am advocating for the companies who have very short runway or they missed the milestones and that is why their previous investors don’t want to follow on. Sometimes companies ran out of cash because of the pandemic or war in Lebanon/Palestine etc. There are so many things that could happen! But the business still has perspectives. When I trust the founding team to find the solution, I present it this way:
Challenges which I see:
I see a lot of companies, funds that are trying to develop either a model for algorithmic trading or a certain recommendation system for investors. Many of them tried that, I know Arjun Sethi, an American GP from Tribe Capital, he built an internal product for his fund and is raising capital for that. And we see how investment analytics and data companies start to soar. Previously this year AlphaSense raised at $4B valuation and BlackRock acquired Preqin for $3,2B in cash in June. Previously technologies were not there, it was not possible to build the same even 2 years ago. Right now we are ready technologically and there is a window of opportunities (my bet is on 1,5 years) to build a strong company in this domain). The Multi-trillion investment sector just started its transformation to become truly data driven.
Another challenge for all b2b companies is the deal cycle. And some of the companies in the Zenpulsar portfolio close within 1 month, some of them said that they can just start the pilot with them in 9 months, because they have a backlog of other data products to test for 9 months upfront. In this case, the company should have a very clear picture of the Ideal Customer Persona, to balance the portfolio and deal cycle. They are getting there, there is not a lot of data for that at the moment. But by the end of the year they will sort it out.
They are a young company with a limited portfolio of data products at the moment. Big hedge funds invest in different asset classes using different strategies. Also Zenpulsar’s data has a minimal timeframe of 5 mins, which limits its usage for high frequency trading. But this is also work in progress. The idea is to sophisticate the tech and win the big share of the market with current robust data products, running R&D in parallel, and then grow within the onboarded client base and feed them with new developed products”
After that, I share a small summary highlighting the positive outcomes of investing in the company as well as summarizing the ask. Investor needs this information to know how much they need to invest and what the valuation is.
Here is the good example of how to present it:
“They already brought 2X to the current investors within a year, They are planning to bring at least 3X to their seed investors within 2 years by the most pessimistic approximation.
Given all that, if this is within the scope that you are looking for, please take a look, they now raise $3M under a valuation of $15M pre money”
This was a real example of the note which I send to VCs.
I hope that material was useful for startup founders who raise capital, for Investor Relations who sell the opportunity for VCs to invest in the company and also for VCs, if they want to educate some of their team members and enhance their business processes at some point.
I am wishing you great multiples in your venture capital journey.
