I'll never forget the day a top-tier Silicon Valley venture capitalist openly regretted having passed on a prior round of funding. We were back at the table in a future round, and they didn't want to miss the opportunity twice. Rejection from investors always stings a bit, but it is a humbling experience to see these firms come around to our business, eventually. After all, this is a community that likes to brag about betting on the next big thing-- not admitting defeat.
Having been in a leadership role at my company Arctic Wolf through most of its six funding rounds totaling hundreds of millions of dollars, these memories drive me to reflect on what might have changed between those early, mid, and late-stage funding meetings. Certainly, the hard work, grit, determination, and achievement by our team had propelled the company forward to earn more interest from the investment community.
On the other hand, in the small and often isolated world of courting investors for fresh infusions of capital, I wondered what might have evolved in the all-important pitch presentation. It's everything about your team's countless hours of work, determination, and devotion distilled into nice-looking slides, a small leadership team, and a well-rehearsed presentation. When everything was on the line to secure the funding, here's what I learned through those early, mid, and late-stage pitch meetings and how our presentation evolved through each phase.
In the beginning, it's all about the story.
Early-stage startups all know the importance of nailing the story and the vision for the company in those early investor meetings. But the story you're pitching must sync up with the story that's being told publicly about your company and its leaders. Investors will walk into those meetings having Googled you and having thumbed past whatever news articles they can find. Does the story and vision you're presenting reinforce the story the public is already telling about you? Is your positioning and value clear and understood in the court of public opinion?
Pitching your company in early rounds is all about getting investors on board with your founders' vision and the market potential for the company both through storytelling and a well-thought-out plan regarding how the vision will lead to further execution. A well-connected founder can open the doors for those early meetings, but make sure what the venture capitalists (VCs) will find on their own reinforces and supports the story you're telling in the pitch. You don't want to spend time dispelling myths in these critical conversations that can make or break your startup.
In the middle, the numbers will trump (almost) everything.
Early-stage investors are willing to bet on an innovative idea and solid vision, but after securing those early rounds the dynamic shifts. Now you're on the proving ground, with investors likely now sitting in your boardroom and assessing the decisions you make as a leader. The middle-stage funding rounds-- those needed to invest in growth, scale, expansion, and product development-- are when the metrics must lead the narrative and articulate the market potential for the company and its investors.
Does your revenue and growth rates factor to achieve a higher valuation for the company? Is your gross margin improving? Is your cash burn healthy, or, at a minimum, in line with benchmarks? Are your customer acquisition costs sustainable and improving? How do you view net retention? The pitch must reinforce the healthy financial performance of the company above all else to give investors important context and a sense of stability as they head into due diligence and data reviews ready to invest for future growth.
A critical step here is establishing solid footing both on the business itself but also how you plan to bring the business to the market. This includes your channel strategy, your alliances (or lack thereof), the geographies you are selling into or will sell into (or won't), market segments, industries tapped and untapped, and opportunities across the horizon. Context shows you had a plan, but more importantly that you have a plan for the future - outside of the spreadsheet.
In the later stages, the story and performance must work together.
At this point in your company's growth, late-stage investments are meant to help build the war chest you need for an eventual IPO, exit, or other liquidity events. The company is more established and is starting to achieve the scale and market performance needed for stable profit and returns. Going into the later stage funding rounds is about marrying the past and forward-looking financial performance with your vision and strategy for scale.
Later rounds must capture the buzz and excitement about the company and its potential as much as they articulate a financial readiness for the next phase. The company narrative and its financial performance must complement one another to tell a more complete story of the future.
Adapt or die.
Our founder's connections, reputation, and vision opened many doors that led to our early funding. Facing a steady stream of rejections in the middle rounds furthered our resolve as a business and forced us to focus on what was important. No round was ever easy, but the difficulties came in different forms. And as the progressively consequential investor meetings continued, adapting our approach and balancing how we pitched our story, mission, financial performance, and forward-looking strategy helped get us where we are today. Our pitch evolved, and it seems like maybe their thinking about the opportunity did, too.