How Venture Capitalists Really Assess a Pitch

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Before Lakshmi Balachandra entered academia, she spent a few years working for two venture capital firms, where she routinely witnessed a phenomenon that mystified her. The VCs would receive a business plan from an entrepreneur, read it, and get excited. They’d do some research on the industry, and their enthusiasm would grow. So they’d invite the company founder in for a formal pitch meeting—and by the end of it they’d have absolutely no interest in making an investment. Why did a proposal that looked so promising on paper become a nonstarter when the person behind the plan actually pitched it? “That’s what led me to pursue a PhD,” says Balachandra, now an assistant professor at Babson College. “I wanted to break down and study the interaction between the VC and the entrepreneur.”

Even before she began her research, Balachandra had some hunches. Most entrepreneurs believe that the investment decision will hinge primarily on the substance of their pitch—the information and logic, usually laid out in a PowerPoint deck. But in fact most VCs review pitch decks beforehand; the in-person encounter is more about asking questions, gaining clarity, and sizing up personalities. To better understand those dynamics, Balachandra spent almost 10 years capturing what happens in pitch meetings and quantifying the results. Some patterns were obvious from the start. For instance, entrepreneurs who laugh during their pitches have more success, as do people who name-check friends they have in common with the VCs. But after drilling down, she drew four broad conclusions:

Please click below to read more:

https://hbr.org/2017/05/how-venture-capitalists-really-assess-a-pitch?

 

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