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Venture capital funding is a critical step for many founders looking to scale their startups. When asked “How do you decide to fund one company and not another?” Our team points to the Six Ts: theme, team, terrain, technology, traction and terms. In our Startup Growth Toolkit series, we explore the six Ts that founders should consider when growing their startup.
Once you have reviewed the terrain (market landscape, competitive comparison and growth prospects) for your startup, it’s important to present your technology.
Marketing Technology to Venture Capitalists – What Problem Do You Solve?
There are often multiple ways to solve a thorny problem and your technology approach likely has strengths and weaknesses. This is frequently encountered when evaluating different target market segments, such as enterprise versus SMB. In your presentation materials and during the investor or client pitch, take the opportunity to articulate and demonstrate that the product is the best solution for target customers’ identified problems. Especially with heightened interest and adoption of technologies like AI, it may be hard for investors to decipher what is hype vs. a truly disruptive technology. Startups must showcase their technology’s competitive positioning and explain why their company has a sustainable advantage.
Tip: Demonstrate how your technology works
It might sound obvious, but the best way to show how your product functions when presenting your project to investors is through a demo. We have seen the car, now show us what is under the hood. A picture is worth a thousand words, and a demo is worth a thousand pictures (and a customer is worth even more). Investors and customers are seeking to understand the secret sauce, and why and how your product is better than any existing alternative, including the status quo.
Hunters is the world’s first autonomous threat hunting solution. To display how it accomplishes first-of-its-kind capabilities, the team demonstrates step-by-step how its product combines unique Attack Intelligence, Hunting AI and Continuous Automation with the enterprise’s existing security data to transform enterprise threat hunting from ‘hunt and hope’ to hunting that works.
Securing Venture Capital for Technology – How Does it Work?
In addition to a demo, include a product architecture slide. Show us the different functional elements and how they interact- similar to the Hunters example above. What other hardware or software is required to allow your system to function properly? The more flexible and interoperable your product or service is, the better. This is partly why SaaS-model software is so highly valued among venture investors and on Wall Street. An exciting part of today’s technology environment is that even hardware is becoming easier to design, lower cost and less of a barrier to adoption.
Tip: Illustrate how and why your technology beats rivals in a head-to-head contest
If possible, conduct a product ‘bake-off’ in advance and bring the results to the meeting. In a test lab, test and compare your product with 2-3 competing products. Hit the products with malware, spam and other software that is intentionally designed to cause damage to the application, computer, server or network to test for resiliency, safety, security and latency, among other factors.
Blumberg Capital portfolio company Imagene AI offers comprehensive breakdowns of their technology and product, highlighting how it uses AI in a way not seen elsewhere in the diagnostics industry. This gives them a competitive edge and a clear understanding for those outside the healthcare industry.
Showcasing Your Technology’s Competitive Positioning
In fundraising meetings, provide a side-by-side comparison of functionality (Harvey Ball charts are excellent for illustrating product comparisons). Explain where your product performed better or worse than the other products and why. Be honest about where your product is lacking and how you plan to improve. On the flipside, also explain why the rivals won’t be able to catch up quickly with the advantages that you offer.
For example, when we met the Nutanix team, they explained that compute and digital storage solutions were too expensive, inflexible and difficult to manage. Hardware was moving toward generic, lower cost commoditization. So, they drew on their software expertise from Google, Oracle and Aster Data to convince us that a storage software solution running on low-cost commodity hardware would provide a superior, cost-effective and virtualized solution for the mass market.
Tip: Explain why your technology has a sustainable advantage
Address how you have or will protect intellectual property (IP) including trade secrets, designs, trademarks and patents. It’s helpful to show the validation of credible expert advisors or customers in this domain.
To strengthen your argument, provide a technology roadmap that shows how your technology will evolve as you innovate, add new features, expand into new market segments, and how you’ll anticipate and respond to competitors or changing market conditions. A detailed roadmap helps align you, investors, customers and your team to plan and manage the business in a holistic, scalable and sustainable manner.
When trying to secure venture capital, show us how your technology and your company will adapt and remain relevant well into the future.
This post is the latest in our Startup Growth Toolkit series that explores what founders need to successfully pitch their business to investors to secure venture capital and growth their startup. Stay tuned for the next part in our series, Traction.
For more on the role technology plays in venture capital funding, take a look at our other deep dives: