Have you ever wondered what a cleantech investor looks for in a pitch or pitch deck? Clean Growth Fund Investment Partner, Jonathan Tudor, shares the formula that he feels engages climate VCs the most.
I heard a quote that summed up pitching to a VC perfectly by Joseph Campbell: “If you’re going to have a story, have a big story, or none at all.”
I am often asked the best method for pitching a technology for funding and my response is always to tell a great story. Here are my reflections from 20+ years of investing in climate tech…
I have read and heard many pitches over the years – some outstanding and some not-so-great. Raising capital is tough. The odds are stacked against a founder to begin with, so making sure that you tell your story in a way that gets an investor excited is a skill akin to writing a movie script. Just like film producers, VCs receive hundreds of propositions a year but only small percentage of ideas that they hear receive backing.
Particularly for a first-time founder, getting your story across in a way that venture investors can easily process is essential. Regardless of where you are in the world, I’ve learnt there is a formula that works best to grab an investor’s attention, giving a founder the best chance of moving forward. In many respects, this mirrors the flow of a great film.
Setting the scene
Getting any story across to an audience depends on how it is told. Scriptwriters set the scene and introduce the characters at the beginning. The challenge (drama) that the characters face takes place in the middle and the end sees them triumph (mostly).
Translating this to a venture pitch… the characters are yourself and your team; the challenge is the specific problem that your technology is solving (the consumer pain you’re soothing). Your triumphant end is your innovative technology that is solving your customers’ problems.
Start off lightly
Your initial pitch should be light on detail, particularly the technology side – not absent, just light. The chances are, whomever you’re speaking with will have a technical background in engineering, physical or biological sciences, like my colleagues at Clean Growth Fund. They will have the capacity to understand the technology, but don’t assume that they’re ready to jump into a deep technical overview of the genius behind your innovation. That will come later.
“Go ahead – make my day”
As a venture capital fund seeking UK based innovations that significantly reduce carbon emissions, we need to hear and get excited about what the net GHG emissions savings will be, and they must be material. If you haven’t tried to quantify it, don’t press send on the deck until these crucial statistics are ready.
“Houston, we have a problem”
Start by describing the problem that your technology solves or the market pain that you’re going to soothe. The more specific you can be the better. As a guide, here is a list of questions that you may want to answer when describing the problem:
- Who owns the problem within the customer and what’s their role (COO, VP Sales CFO etc)?
- What is their motivation to have it solved now, and how painful is it for them? Understanding this helps a VC to understand your customers’ propensity to buy and how they’ll value your solution.
- How many companies or people face the same issue? Highlight conversations you’ve had that validate your case. Give quotes from them if you can.
- As a climate tech investor, it’s important for me to hear how this will reduce GHG emissions. If your business scales successfully, we need to hear that your clean tech innovation will abate at least 100k tonnes of CO2eq a year; but very early on in your story spell out the carbon cost of your chosen market.
“I’m going to make them an offer they can’t refuse.”
Next, talk about your solution to the problem. Go light on technical detail though, saving the deep technical conversation for another day. Here are a few further guide questions to take you through this part…
- How you solve the problem…
- How does your solution work technically?
- How have you built it, protected its novelty and demonstrated its effectiveness with a real user?
- How have customers and users responded?
- What have you yet to prove and demonstrate?
- How much CO2 emissions do you save each customer?
- Don’t be afraid to talk about current alternatives that are available in the market. Why and how does your technology solve a customer’s problem better? Why are you their best value solution (not necessarily the cheapest)? Understanding and defining your technology’s value propositions is a powerful tool for helping your business to stand out against competitors.
In this part, talk through how you’re currently selling and manufacturing your product. Throughout the ‘how’ – VCs want to hear about the people who are responsible for the delivery. What experience do they have that gives confidence they will deliver? Read below for questions to answer when talking through the ‘how’ during your pitch…
- How do you reach your customers?
- Do you sell directly or via channel partners and integrators etc?
- Who in your team is responsible for this and what makes them great?
- If you sell via partners – what’s the motivation for them to sell your product…why will they promote it ahead of other companies’ solutions that they sell and how do they get compensated?
- How do you manufacture your product or provide your service?
- Is it done all in-house – how much is outsourced and how will you build your supply chain?
“You’re gonna need a bigger boat”
Quantify the financial costs of your venture. Use this part to demonstrate that you are an expert in your technology and that you completely understand your costs at different time periods.
- What is your cost to produce and how will that vary as you scale?
- What are your costs to sell, reach and message your customers?
- How much will it cost you to continue to develop your products and what does this look like over 5 years? Of course, this will be reflected in your financial plan, but explain the numbers as part of the story.
I always look at the margin levels you’re suggesting and compare them to what I’ve seen achieved in other companies that have similar business models. I suggest you do the same. If your margins differ massively, be prepared to explain why else it affects your credibility.
“Show me the money”
This is where you get down to the nitty-gritty – after all, you are pitching to a climate VC for funding.
- How much are you looking to raise? Explain what you will use the money for, what are you doing to derisk?
- How long the funding will last is important to consider. Set milestones that you will hit 6-9 months before your cash runs out.
These milestones are the ones you’ll point to when you start shaking the tin for your next investment round. They will be the justification for the significant uplift in valuation we all want. The 6-9 months of cash will allow you to shout about your progress without the pressure to close a round before you’re out of money.
Adapt your pitch
There are many variations to the flow of a pitch, but they all tend to be very similar. You will need a few versions of your pitch deck ready to go to suit the varying pitching opportunities that come your way.
- You’ll need a ‘no-slides’ 2-minute clichéd elevator pitch – great for networking events
- Create a compact pitch deck that’s light on the tech ready to email to VCs
- Have a 30-45 min slide deck ready to go for a first in-person meeting
- Prepare a more extensive version of the deck (with back-up slides) for the partners’ presentation and Q&A.
“Just keep swimming”
At Clean Growth Fund, we know that raising capital is not an easy process as we’ve been there ourselves. The team has decades upon decades of experience supporting cleantech SMEs and, often, the beginning of a founder’s journey can be the hardest part.
I hope that this article gives you a good guide and understanding of what Clean Growth Fund (and other VCs) look for when on the hunt for new cleantech innovations. If you are a low carbon innovator with a UK based technology that you think we need to know about, we’d love to hear from you.