If you're leaving bank now, you might want to be an entrepreneur. You may also want to join an established financial technology firm. Maybe you can fund yourself using bonuses you earned in banking, but chances are that eventually you’ll need to get venture-capital firms on board to fund your growth initiatives and take the next step. At this stage, you may discover that all that your experience as a banker doesn't cut it when you're talking to VCs.
VC investors are a unique audience, and some are very tough nuts to crack. We asked ex-bankers who've been on VC pitches for their advice on the pitfalls.
Former J.P. Morgan, Merrill Lynch and HSBC banker Spencer Lake, having risen all the way to vice chairman and group general manager of global banking and markets of the latter, retired from banking in 2016. He is now an investor in, adviser to and board member of fintech startups. These include Fenergo, which provides client lifecycle management software to investment, corporate and private banks, and cloud banking software firm nCino, both of which got significant investments from Insight Venture Partners, as well as Callsign, a cybersecurity authentication provider that received a recent investment from Excel Venture Management.
A lot of new fintech companies launch without any intellectual property (IP) that could be copyrighted, patented or trademarked. That either means your idea isn’t unique or someone else will come along and steal it.
“You have to have the right IP that is specialized so that your solution will be unique,” Lake says. “A former banker who is not a technologist typically has not thought through that tech differential, unless he’s pitching someone else’s IP.
“If you don’t have those attributes that VCs look for, then you will struggle with your pitch,” he says.
Don't lead with how the problem you are solving is being addressed by existing financial institutions or other fintech startups, especially if your argument is that current solutions are overly complicated. That is the fastest way to lose your audience, according to Katie Hunt, early-stage company adviser and co-founder of The Fund, a New York-based VC firm.
“Start with explaining the simplest form of the problem you are solving and then dive deeper into how you are solving it and why your solution is different,” Hunt says. “Your pitch should be focused on your company, not on why innovation is necessary in the market as a whole.
“All a potential investor really needs is to understand what you are solving, how you are solving it and where you are in that process,” she says.
Just because you use the phrase “machine learning” during a VC pitch meeting, it doesn’t mean you’ll be taken for a machine learning expert.
“People get enamored with terminology that sounds good and I’m sure feels good [to say during a VC pitch] – AI is the latest buzzword, so everyone wants to do something around AI,” Lake says. “They have a business proposition, but they don’t have a use-case.
“It’s critical in tech to have a problem that needs to get solved rather than a solution without a problem,” he says. “Blockchain is another one – it’s an infrastructure design; it’s not something specific that has a use-case just because blockchain [is hot].”
The VC community is very attuned to the various forms of tech they focus on. They need to see that you understand the lay of the land and are thinking big.
“If you’re a former banker who’s not a technologist by training, focus on a big market with plenty of potential, a marketplace that is big enough so you can see value creation,” Lake says. “You have to have a real go-to-market strategy to commercialize what you’re trying to do and the people to take it to market in a systematic and meaningful way.”
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