Keeping with the theme of periodically giving you info you probably don’t need about pitching your startup to venture capitalists:
VC Pitch Tip #9 – Don’t show the VC the IRR the can get from investing in your business
Providing a venture capitalist with an exit analysis that shows how great of a return they will get from investing in your startup is one of the biggest rookie moves you can make. VCs don’t need you to show them how much money they will make by investing in your business. Doing those exit calculations is kind of the VC’s job. That’s what we do. Sentences and graphs saying:
- “A $5 million investment in our business will be worth $150 million in four years”
- “Investing at a $12 million pre-money valuation will yield a 25.32x return for the investor”
are very off-putting. Venture capitalists cringe when they see these sorts of things in presentations. Don’t waste a slide on it and don’t waste the VCs time.
It’s pretty obvious that if your company goes from nothing to $50 million in revenue in three years there is a return to be made. Attempting to sell the venture capitalist on exactly how much they will make is unnecessary and distracting. Stay focused on explaining how the company GROWS to that $50 million size and leave the exit modeling to the VC.