I recently had the privilege of being a judge at the U.C. Berkeley Venture Capital Investment Competition (the “Competition”). This program was hosted by the Berkeley Entrepreneurs Association and the Berkeley-Haas Entrepreneurship Program (affiliated with the Haas MBA School at U.C. Berkeley).
The Competition was terrific, bringing together Berkeley-Haas and U.C. Berkeley graduate students to expose them to the venture capital industry and early stage startup companies. The event lasted a full day and was expertly administered by the Competition Executive Committee (particular kudos to Adeeba Khairzad, Esmond Ai, Rhonda Shrader, Neha Ruikar, Neha Dobhal, Ludwig Schoenack, Terence M. Kelly, and Dmitriy Berenzon for helping to put on a great event).
The Competition consisted of real, interesting startups that were currently seeking funding, pitching their business ideas to the student venture capital teams. The startups competing were Intento, Jobwell, Mooqita, World Hearing Organization, and ZoneTap. I particularly liked the potential of the World Hearing Organization to revolutionize the hearing aid industry.
After the initial pitches, the student venture teams dug deeper into each startup investment opportunity through due diligence reviews and interviews with the entrepreneurs. The student venture teams also engaged in a mock negotiation of a venture capital term sheet with the entrepreneurs.
The judges, who consisted of seasoned venture capitalists and entrepreneurs, sat in on all of the startup pitches, the due diligence review sessions, and the mock term sheet negotiations. The judges’ role was to pick a winning student venture team, taking into account all the relevant factors.
All of the student venture teams were terrific, particularly the winning “Alpha” team consisting of Andrew Briggs, Alibek Dostiyarov, Amy Fan, Matthew Bond, and Max Kubicki. They stood out because of their targeted due diligence questions, their technology savvy, and their strong presentation skills.
Here are some of the most important things I learned from being a part of the Competition:
1. Be Prepared to Come Before Very Savvy People When Pitching to Investors
The Haas-Berkeley student venture teams were much more sophisticated and technology savvy than I expected. They quickly understood the key elements of the startups’ underlying technology—including artificial intelligence, internet, apps, SaaS, and more. They were also particularly smart about sales and marketing issues the startups would face.
2. Most Startup Entrepreneurs Can Do a Better Job With Their Pitch Decks
Each entrepreneur had a 15-minute time slot to pitch their company using a PowerPoint pitch deck. All of these pitch decks could have been better, addressing some of the following key issues more completely:
- What is the mission and vision of the company?
- What is the big problem you are trying to solve?
- What is the addressable market opportunity for the company? (Investors want to see that the company has the potential to grow very big in a large market.)
- What key traction has the company obtained to date?
- What proprietary technology does the company have that will help it stave off competitors?
- What is the go-to-market strategy?
- What is the business/revenue model?
For tips on developing strong startup pitch decks, check out How to Create a Great Investor Pitch Deck for Startups Seeking Financing.
3. Selling Is a Two-way Street Between Startups and Venture Capitalists
Naturally, the startups were all in “selling” mode trying to impress the venture capital teams about their potential prospects. But the best venture teams were also in selling mode—explaining to the entrepreneur who the venture team was, their relevant experience, and how they could help the entrepreneur become successful. Some of the venture teams jumped into due diligence questions without much of an introduction. In the real world, it’s important for both sides to build mutual rapport and respect.
4. Startups Must Be Prepared to Answer Hard Questions About Competitors
The startups frequently received questions about the competitive landscape for their business. These questions included:
- Who do you see as your principal competitors?
- What differentiates your company from those competitors?
- If Google or Amazon decided to go into your space, wouldn’t they just crush you?
- How do your competitors match up on price and functionality?
Entrepreneurs have to thoroughly understand their competitors and be able to clearly explain why their startup has advantages over those competitors.
5. Startup Entrepreneurs Must Understand Complex Financial Issues
As a startup, you must keep on top of your expenses and learn how to thoroughly understand financial statements and budgeting. Many startups have failed because the entrepreneur wasn’t able to adjust spending to avoid running out of cash. Establishing a detailed, month-by-month budget is important, and this budget must be regularly reviewed.