About the author: Keet van Zyl is a dynamic investment expert with extensive growth equity experience. He worked at industry-leading companies such as Procter & Gamble, Investec Bank and HBD Venture Capital; and co-founded growth equity fund manager KnifeCapital as well as AngelHub – SA’s first Business Angel Investment Group.
Here’s the thing: if you do a cold-call pitch to a Venture Capital (VC) investor using email, your proposal is already at the bottom of the pile before anyone has even read the subject line.
The reason: VCs mostly rely on warm referrals from within their trusted networks to generate dealflow, as this acts as an automatic filter and increases the quality of proposals. It also says a lot about an entrepreneur that goes through the trouble to “stalk” a VC and infiltrate his or her networks to ultimately get introduced, or introduce themselves face-to-face in the right forum. I get that not every entrepreneur knows this and sometimes a cold email introduction is the way to go, but then you should really make it count.
What I don’t get is how some entrepreneurs abuse this medium to send real funding requests that can be classified as spam. Below are extracts of 10 of the more memorable ones we’ve received so far in our Knife Capital inbox in 2013 with insights on why each e-pitch self-destructed in five seconds.
(Because of confidentiality, some info is masked and the entrepreneurs’ names and key concepts are not disclosed. Spelling mistakes and nonsensical sentences were left as is. Please note that my VC thoughts are not reflective of the potential of the underpinning ideas, but rather about the quality of the e-pitch).
I want to know whether it is possible to start a business by using venture capitalists if I only have an idea? I am really keen to start something because my life is so boring right now and I feel I can do so much more.
Hope to hear from you soon.
VC thoughts: Not being satisfied with the status quo is great motivation for starting something. However, it’s more about the execution than the idea. If you have spare capacity, try doing something about implementing your idea and start gaining traction. Then talk to VCs once you’ve figured out what the business model and funding requirements are.
Lesson: VCs invest in an entrepreneur’s ability to execute on an idea. As Jason Weaver explains in this post — the days of just funding an “idea” are over.
Subject: Capital Needed For An Technological Idea That Can Save The Music Industry
I have a technological idea that can save the music industry world-wide its a simple but effective method of picking up revenues in the music industry.
A large amount of capital will be needed and this will make us multi-millionaires.
VC thoughts: Unfortunately this email did not come from firstname.lastname@example.org, and it also did not arrive 12 years ago before he revolutionized the music industry. So it can be (has been) done. This e-pitch touches on a couple of elements without providing any tangible information:
Team credentials: ? (But not Steve Jobs & Co.)
Solution: Technological idea.
Business model: Simple but effective method of picking up revenues in the music industry.
Funding requirements: A large amount of capital.
Use of funding: To save the music industry.
Investor returns: This will make us multi-millionaires.
Exit Strategy: ?
Lesson: If you make a big statement like this you have to pick an industry that really needs saving. And clearly motivate the problem statement.
Subject: Funding/ Equity
We hereby respectfully request your esteemed company/ organisation to consider funding of the Bisiness Plan as attached for your perusal.
It would be most appreciated if NDA is signed, and upon reciept of the signed copy the password will be forwarded in order to accesss the document.
We thank you most sincerely for your time and look forward to hearing from you soonest to the mutual benefit of all concerned.
VC thoughts: Sending a password-protected Business Plan plus Non-Disclosure Agreement (NDA) is a catch-22 situation. See this post by Brad Feld on why most VC’s don’t sign NDAs.
Lesson: Never ask VCs to sign an NDA upfront. First do your due diligence on them and even speak to some of their portfolio companies about their business ethics, but disclose as much as you can on your venture when the communication channel opens up.
Subject: XXX Business Name >
I am XXX, I need an investor.
regards XXX 082XXX
VC thoughts: e-pitches don’t get shorter than this! Also not more useless.
Lesson: While e-pitches need to be succinct, there has to be some meat on the bone to enable VC call to action.
Subject: APPLICATION FOR FUNDING
Dear Sir / Madam,
I am XXX from XXX (Pty) and we wanted to use this opportunity to present our Business Plan which contain all our business information to apply for funds.
We are looking for a Capital that can help us function very well and expand our company. Our close personal and business relationships with the ruling party’s family members will assist.
Please do not hesitate to contact us if you require any documents or information that may help for the process…
VC thoughts: While there is a perception that sometimes business in Africa blurs the ethics line, credible funders won’t be drawn in. And besides, it will limit exit options.
Lesson: Never hint at questionable ethics in a pitch. It’s not necessarily a bad thing to mention key business relationships, but provide context.
Subject: APPEAL FOR FINANCIAL ASSISTANCE
Date: 11 February 2013 9:29:10 AM SAST
To: Funder#1, Funder#2, Funder#3 and 64 more…
VC thoughts: VCs are not naïve. They don’t expect you to only engage with them on your funding proposal. In fact, some even encourage it. A little competition is healthy to keep everyone sharp. But a blatant shotgun approach copying everybody is the quickest way for your proposal to not pass go and not even collect a response. This is a clear indication that you did not analyse their funding mandates and therefore don’t understand their specific needs. Neither will your (lack of) future clients. This is spam!
Lesson: Understand the investment mandate and deal preference of your prospective funder and tailor-make your approach.
I am looking for two INVESTMENTS.
The first one is a beverage-drink, which will put Red Bull worldwide in the shadow. It is my invention with a patent and a intern Trademark. Profit worldwide Forecast : 2x 500 mio. € in 5 years. In 10 years 2-4 Milliarden €. I am in need of 50 mio. € Total.
The second is the etablishing of EUROPEAN HOOLYWOOD in Maroco. With my project I will write HISTORY. I am in need of 250 mio. € Total Worldwide Profit : 5 Milliarden € in 5 years. In 10 years 20 Milliarden €.
If you are intrested my Business Manager will send you all the information
VC thoughts: I am sure you will rewrite history with a concept that combines the film industry elements of three continents. I actually need a Red Bull to just enable me to compute these profit projections. They seem a bit conservative though.
Lesson: Don’t present two totally different concepts in the same pitch, and when you do one, add a sense of realism to your competitive positioning and numbers.
have you ever stay on the river coast, watching unbelievable quantities of water flowing near you every second, each minute, in hours, days, months and years? Can you imagine which power we would need to stop this water movements or which energy we would need to move such water quantity by machine power? If your answer is negative, probably you do not understand that power for water movements is actually coming from endlessly big Gravitational Energy.
Regarding wrong explanations of physical processes — mixing of reasons and consequences — it seems to be that huge amounts of energy which is coursing slowly movements of water masses we could not use — at least not with higher efficiency. Therefore, to use that energy, it seems to be that the only possibilities are in XXX….
All I need for this revolutionary project is honest strategic partner.
VC thoughts: My mind is still trying to mix reasons for not investing, and consequences of actually investing.
Lesson: The main lesson here (of the many that could be picked out) is to actually include a very relevant subject line that sums up the reason for the email in a few words. A suggestion in this case, Subject: Strategic Partner Req’d for Water Energy Project
Subject: XXX finance (investment needed)
I recently started a company called XXX (pty)ltd and is 100% shareholder I have a website and need some funding as the office is in Mitchells plain and I can have the entire Mitchells plain, in my hands by just giving small loans I have a business plan in place, if you willing to look at it I will mail it to you .Hope it meets your approval.
VC Thoughts: I quickly Googled “Mitchell’s Plain Small Loans” and it returned about 185 000 results (0.40 seconds). Your website did not feature. Seems like the entire Mitchell’s Plain is already in someone else’s hands.
Lesson: Sweeping statements about your target market without showing real insights on the market potential erode your credibility.
I would like to call you telephonically tomorrow as I need about R1,000,000 capital in my business and I expect to turn over R15,000,000,000.
I am sick and tired of being told to F… off by my x because I call to ask for an extra R100 airtime and I am tired of being insulted by her and having to swallow the insults because I nedd her.
I asked her to Just give R15,000 a month until payment of our first order and I would give her R5,000,000 but have decided that I will go completely insane with the insults so hence my call to you. Please guys you can make a lot of money from me but I also need your help.
I have not registered my company as there was no need to and XXX are quite happy to pay me anywhere in the world.
Please set up a time to talk tomorrow.
VC thoughts: While this remains one of our favourite e-pitches; that is just too much information!
Lesson: Don’t overshare personal information in a pitch. It is unprofessional and indicates that you can’t focus on building a business when times get tough.
The reality is that a VC walks into your pitch meeting biased. There are myriad subtle items that affect how a VC feels about a potential investment before even going into any meeting. This includes the e-pitch as it is a key interaction that influences “pattern recognition” to filter high-risk investments. Get it right!
For more insights on how to structure the infamous VC intro email, see this post.
Please share your reactions, thoughts and experiences in the comments below!