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Viewpoint: Analytics complement passion for venture capitalists

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David LaRoche

By David LaRoche
Guest Columnist

As important as timing and luck are for entrepreneurs hoping to grow their small enterprise into a Wall Street darling, entrepreneurs with good ideas often fail to raise money from venture capitalists because they don’t sufficiently integrate data and analytics into their plans.

Based on our experience, most venture capitalists (VCs) expect to see the following in any funding request:

  1. Detail the Data
    Identify the data elements, format, and storage environment you will have.  A few PowerPoint slides should show key data elements, environmental controls, data access, and the flow of the data and start the ball rolling for your business that you take this concept seriously. It also demonstrates that you speak the VC’s language and understand their priorities.
  2. Build the Marketing Plan
    Using the data elements you just identified in Step 1, demonstrate to the VC how your product or service will enter and hit the market. Using data, show your growth potential for the first six months, 12 months and long-term all the way out to five years as possible. The VC wants to see what type of return it will get on their investment and when that return can be expected to materialize.
  3. Build the Risk Plan
    Make sure you have a detailed Risk Plan or Loss Forecast attached to the Marketing Plan. Have a qualified risk professional produce the Risk Plan and include that person in your leadership-team summary (or identify them as a contractor). VCs are very wary of optimistic risk plans done by CEOs or CFOs who are heavily invested in the business already.
  4. Detail the Reporting Package
    It is a critical final piece to the pitch deck to show how you plan to report results to the VC. Your reporting package should include KPIs, key reports and dashboards you will have ready to go from day 1. Samples of these reports, even if they are borrowed from other businesses and redacted are good to visualize the right detail to the VC.  Show via description and/or graphic examples the reports you plan to build. Most VCs won’t expect you to have a 50-report inventory ready to go for Day 1. After all, that’s why you are pitching to them in the first place: to get the money to invest in this effort. Showing the VC what you plan to do with the money from a reporting perspective gives them a degree of confidence that your business will be well-informed by data and you won’t miss simple trends that doom many uninformed businesses.

Don’t be so excited about your business and the opportunity that you fail to prepare the right pitch deck that incorporates the data and analytics into the success story that will define your company. Take the time to optimize the appearance of your pitch deck. Avoid lots of words. Create clear graphs that tell a story that you can read on a laptop screen. Script in a way where the PowerPoint hits the highlights; your Speaker Notes bring more detail but can be understood by someone who isn’t present for the pitch; avoid clip art; and show diversity if you can.

Few people predicted the pandemic but companies that could show with data their adjustments to their growth and risk plans (e.g., how productive their employees are in a virtual environment) were more likely to keep their investors calm and reduce distractions from the myriad of ad-hoc data requests.


David LaRoche is managing partner of U.S. operations for Newark-based Predictive Analytics Group, which specializes in management consulting, operational efficiencies, data management, business analytics, financial planning & analysis, marketing, and model development (including machine learning).


 

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