Only 2 out of 100 startups pass the needle’s eye
A very interesting article in Forbes that Olle Aronsson and Stefan Lundell mentioned in the Dagens Industri podcast Digitalpodden describes the work of one of the world’s most successful VC companies. The article is called “Inside Sequoia Capital: Silicon Valley’s Innovation Factory” and can be found here.
Sequoia Capital was founded in 1972 and has been involved and early investors in companies such as Apple, Oracle, Yahoo, Google, LinkedIn, Instagram, Dropbox and WhatsApp.
The article is interesting in many aspects, but since I previously wrote two pieces (both in Swedish), “Communication is crucial when uniting VC capital and startups”, and an article in the business Weekly Veckans affärer on the same theme: “How we get talent and money to meet” I think part of the article supports my thesis.
Why did they choose to invest in Instagram and Linkedin, but not Twitter and Pinterest?
The article does not give any direct answer to the question, except that the ownership Twitter offered was too small, but on the other hand had they believed enough in the case they probably would have made the investment anyway. (They have since become more flexible with their terms.)
Sequoia is very quick to invest into companies that feel right. As it says in the article “Pitch to Sequoia partners on Monday morning and, if everything goes well, you can have a handshake agreement on funding that afternoon”. For this to happen it’s not enough to deliver a good pitch, all aspects of your presentation must be of top quality.
The pitch is crucial
Of course the pitch consists of many elements, but since the story often only is based on a vision presentation and communications skills becomes crucial.
Some entrepreneurs have an innate ability to enthuse and make their vision credible but they are the exceptions. Think of actors, who are professional performance artists, they rehearse up to three months before the premiere of a theatre play and the material they work with is frequently written by prominent authors. If the performance is good but the material bad, or vice versa, the end result is never good.
The same goes for your pitch. Put a lot of time and effort in the material as well as your own performance. Get relevant input and make as many dry runs as the people around you can handle. There are simply no shortcuts and as with so many other things with practice comes perfection.