How to pitch deeptech VCs well 

This guide covers how to convincingly pitch your team, technology, defensibility, market, and scale to discerning investors.

To pitch VCs successfully, you must understand their mental models of which startups reach $1B+ valuations. 

It all starts with assessing your team.

Team

The earlier the company (e.g. pre-seed), the more your pitch hinges upon the quality of your team. Particularly in deeptech, investors often look for these qualities: 

• Are you commercially minded while also having technical depth?
• Is this actually your life’s work—or are you an opportunistic entrepreneurial tourist? 
  
  • Is this the last idea you want to pursue in your career—and has your whole career been leading up to it? Or is this an idea you pulled out of a hat because it seemed viable and you wanted something to work on? Deeptech VCs want to see lifelong passion that led to this moment. That's what gives you the drive to not give up when things get tough.
• Do you have the ambition to scale this business to, say, a billion-dollar-plus valuation? 
  
  • Bluntly, that’s what the financial math of most venture funds requires.
• Are you relentlessly resourceful and do you move fast?
  
  • Historically, very few startups have succeeded if their teams moved slowly. It’s one of the strongest indicators of potential. Why? When you move slowly, your capital runs out, your competition beats you to market, and your culture normalizes a lack of urgency.
• Are you a persuasive and authentic storyteller? 
  
  • Can you hold investors' attention during a pitch? If you can’t do that, VCs will doubt your ability to fundraise in future rounds and hire great talent too—because those also hinge upon the art of storytelling. And VCs know that great startups are built around killer talent. In fact, a rule of thumb VCs often use to assess you is whether they themselves would want to work for you.
• Have you conclusively thought through the idea maze for your business?
  
  • This means you’ve thought through all the ways you could go to market, how large the bottom up opportunity is, how to maintain competitive defensibility, and every other nuance of what might happen on your way to success.
  • If it feels like you haven’t thought through all the permutations of how your startup can or cannot succeed, it’s a big turn off to investors because it shows a lack of strategic thoughtfulness which might carry over into how you make the rest of your business decisions. 

Figure out how to reverse-engineer those six qualities above and project them convincingly. Take them seriously, and VCs will bet on you—the founder—even more than your idea, and give you more leeway on how much progress you've made to date.

Think of it like this: Investors invest in growth curves. How capable are you as a founder? How much will you yourself grow? That's a growth curve. Sure, you get bonus points for having built successful businesses before, having relevant technical expertise, and so on. But generally those qualities aren’t comprehensively what make your team formidable over time.

Let's move onto the next trait VCs are assessing.

Technical novelty

In deeptech, the question of “why now” refers to why is your idea only now viable? You need a good answer to this. The answer usually takes the form of technical advancements and market willingness have only recently reached a point that makes this business possible and scalable. 

Let’s say that isn’t true for your startup and that your business could have been built years ago. If so, investors will wonder: Then why hasn’t this idea succeeded already by someone else? Investors don’t assume it’s because past attempts were poorly executed. No, they assume the market timing was wrong then—a fundamental condition wasn't yet in place. And if the market timing is still wrong today, they’ll assume your attempt at the idea won’t work either. That's why you have to know your "why now." To repeat, this is a massive factor in why VCs invest in deals. Maybe the biggest.

So, deeply ask yourself why no one has succeeded at this idea yet. Generally, the most compelling answer is: Technical advancements and market willingness have only recently reached a point that makes this business viable. Then prove this to be the case. Have overwhelming supporting evidence.

Defensibility

Why can’t your competitors do what you’re doing now or in the future? Or if they can in the future, what can you do with your head start in the market to get such a lead (say, with customer or regulatory adoption) that no matter what happens you’ll always retain a huge portion of the market and continue growing?

This is maybe the second biggest trait that many VCs look for after team. And it's also by far the weakest trait most founders have an answer for. Take this one seriously.

Be able to articulate why your competitive advantage is durable. Deeptech investors like knowing why you’re a globally optimum solution and that you won’t be sideswiped by orthogonal approaches that might make you obsolete over time. Can you argue why there won’t be a technology that is a substantially better solution than yours over time? 

Here’s a starting point: IP and technical novelty generally form the basis by which a company can have a head start over its competition, while longer term defensibility often emerges from customer lock-in, distribution partnerships, speed to market, network effects, or compounding data or capital moats.

Go to market

For customer acquisition, do you have a strategy that will allow you to reach scale within a reasonable timeframe? VCs often want to see $100M+ per year (and ideally much more) revenue within 10 years. And ideally more like 5-7 years, to be frank. Are there distribution channels you can pursue, and early proof points of being able to navigate direct B2B or B2G sales?

It is surprising to investors how few founders comprehensively think through distribution. They almost all assume "if we build it, they will come." Maybe 1 in 10 pitches do we hear a clear argument for how they'll actually get in front of buyers.

If you can’t devise a strategy for doing that repeatedly and at scale, your company feels less inevitable. You want your success to feel inevitable—because you’ve thought through every contingency. What you’re trying to make a case for is rapid, frictionless adoption—aka market pull. This emerges when three things are true about your target audience:

• Comprehension: Consumers intuitively value a product without needing an extensive explanation of it.
• Value: Consumers perceive enough value to justify the labor, price, and risk of switching to the product.
• Enthusiasm: Consumers want the product right away. (The enthusiasm of immediacy helps them overcome the friction of switching.)

Early signs of commercial intent help point towards the existence of market pull. We'll talk more about this in a forthcoming guide on LOIs.

Competitive landscape

You should always address your competition. Because if you leave this research entirely up to VCs, and if they aren't as good as you at understanding your competition, VCs will often falsely conclude that they should be scared of your competition.

When addressing competition, discuss why your solution is so superior that a customer is willing to endure the switching costs to adopt your product. Keep in mind that being somewhat better than competitors isn’t enough to overcome the annoyance of switching. You have to be way better.

Exit potential

An incredibly common reason why VCs pass on deals is because VCs don’t believe the startup can reach the billion dollar or more valuation needed to make their fund’s math work (i.e. for the fund to break even).

As a general rule of thumb, early-stage VCs look for a billion dollar or larger "exit" (aka liquidity event) within 7-10 years of investment. But exactly what they’re looking for depends on the size of their own fund. A $50M seed fund can get away with smaller exits. A $2B megafund needs you to be the next OpenAI at $100B+.

Two ways to assess the viability of getting there are 1) looking at M&A comparables in your sector and 2) what it might take to go public. 

Within assessing M&A, a quick back of the envelope assessment looks like: 

1. Are there target buyers in your sector who your company would be of strategic relevance to?
2. Are they large enough to support a $1B+ exit?
3. Do they have comparable acquisitions of this magnitude?
4. Have comparable startups been sold in your sector at this magnitude - how much traction did they have at the time of exit? 

As for public markets: First, determine what the free cash flow multiple range is for your sector, and work back to the amount of free cash flow you would need to be able to hit your target exit price. Say a sector has a 5-10x FCF multiple, it would take $200M in annual recurring free cash flow at the 5x multiple to reach a $1B valuation. Given your revenue and margin projections, is there a pathway to achieving this within a VC’s 7-10 year timeframe? 

This may feel far off, but it’s critical for two reasons: For VCs, it is a key aspect of decision making. For you, it anchors the line of sight to building a business of the scope of your ambition.

Pitch structure

When structuring your pitch, deck, and memo, here's a general outline that's safe to follow: 

• Problem: What's the explicit problem your customers face, and what are its implications?
  
  • Some decks will start with an industry wide gap: “$100B is lost to inefficiency in X." It is okay to start with this, but it is better to clarify impact on an individual customer level at the same time. 
• Solution: Why does your product solve this problem—what are the distinct benefits customers receive?
• Team: Who is on your team, what are your backgrounds, why are you the best team to tackle this problem?
• Why now: What has changed in the world such that your business is only possible today? Are there trends that make your business inevitable? 
• Market size: What is the bottom up serviceable obtainable, addressable, and total market size of your business? 
• Traction: Can you point to any commercial traction, or indications of demand from your customer discovery process? Outlining technical traction is important as well: How much technical de-risking have you done? What remains to be proven? 
• Business Model: What is your revenue model and expected margins?
• Competition: How do you compare to existing competitors or incumbent processes?
• Raise and use of funds: How much are you raising, what is it allocated towards?

These are general guidelines, but whatever narrative arc best frames why your business is inevitable is the way to go.

Ultimately, understand that VCs are paid to underwrite risk. They want you to give them a framework to understand what risk they are underwriting, not to tell them that there is no risk at all. If there is no risk, then this isn’t a venture business. No risk, no reward.

Tell them as clearly and succinctly as possible what the core risk is, and then let them decide if they are willing to underwrite it. You can then provide all the mitigating factors.

Once you have a deck you’re proud of, please share it with us at Julian Capital. We promise to look at it within a few days. Three of us spend our entire weeks taking calls based on the decks that come in. We invest $750K or more into hardware companies, and we move fast. When we invest, we help build your customer acquisition pipeline and branding, and we are unparalleled in our ability to help you raise future rounds thanks to the Deep Checks network we built.

Read the next guide in our series: Prove that customers want your product.

—Julian, Jacob, and John from the Julian Capital team