Startup Life/Opinion/ Pitching to VCs? Leverage the science of perception Data isn’t the only driver of investors’ decisions. Here are some other factors to consider, according to one associate professor. Chia-Jung Tsay Chia-Jung Tsay \Startup Life Which SaaS products are getting cut? By Tim Smith 22 February 2023 Startup Life/Opinion/ Pitching to VCs? Leverage the science of perception Data isn’t the only driver of investors’ decisions. Here are some other factors to consider, according to one associate professor. By Chia-Jung Tsay Wednesday 8 June 2022 By Chia-Jung Tsay Wednesday 8 June 2022 During the pitching process, founders typically focus on conveying a lot of information about their business — its backstory, the ins and outs of the tech, and why their idea would solve a major problem. Yet data isn’t the only driver of investors’ decisions. Here are some other factors to consider. Investors are influenced by visual cues When you’re pitching to VCs, it shouldn’t matter what you look like, but physical presence and passion have the potential to trump the substance of business propositions. My recent empirical work across 12 studies with 1,855 novice and experienced investors has highlighted the importance of entrepreneurs’ passion and physical presence during pitch competitions. Studying different types of excerpts of live entrepreneurial pitch competitions, I found that silent videos alone — and not transcriptions of business propositions, audio recordings or even videos with sound — best allowed investors to identify the actual winners of these competitions. Visual cues such as gestures, facial expressions and body language most caught judges’ attention. “Visual presence appears to be critical when delivering a successful pitch” This suggests that the venture capitalists who decide which entrepreneurs are worthy of investment are primarily impacted by visual cues rather than the content of the business propositions. Although visual and nonverbal information are often discounted as “soft skills”, visual presence appears to be critical when delivering a successful pitch. The research also suggests VCs may be influenced by factors beyond their full awareness — factors not always aligned with their expressed desire to identify companies with the greatest potential for success. Founders may consider dedicating at least some attention to ensuring that their visual delivery reflects the passion that drove them to their venture in the first place. Does working hard really matter? Investors often point to the importance of the founder and not just the business proposition in their funding decisions. It seems intuitive, then, that an effective and passionate communicator may successfully secure funding. Yet there are aspects of the founder that are not always easily demonstrated. “Attempting to align with an idealised image of the striving entrepreneur may actually backfire” In general, we tend to applaud hard workers. Entrepreneurs acknowledge the dedication and hard work it takes to get to launch, and they also gravitate toward underdogs. But other recent research reveals that attempting to align with an idealised image of the striving entrepreneur may actually backfire. When study participants were randomly assigned to read about either a naturally gifted entrepreneur or a hardworking one — despite otherwise identical biographical details and a recording of the pitch — they were more willing to invest and believe in the ultimate success of the startup attributed to the “natural”. This suggests our assumptions about what will persuade our audience may be incorrect. For all the challenges founders face, underscoring that image of the striving entrepreneur, there are likely aspects of starting a business that come more easily to them. Founders may find it helpful during their pitches to balance out their narratives so that others can also see — and reward — their natural talents. Founders also need to consider how well their business proposition might fit with their identity, as perceived by their audience. Each entrepreneur likely belongs to and identifies with a range of categories, including gender and ethnicity. With their audience in mind, founders may want to ask which salient aspects of the business proposition and overall pitch align most consistently with their identity. Understanding your audience A final consideration is often overlooked amid the frantic funding process: take the time to understand your audience. Just as companies use focus groups to tailor approaches and products to customers’ preferences, entrepreneurs may benefit from conducting test runs of their pitches and integrating the feedback they receive. A range of affordable platforms with online participants, such as Prolific, Qualtrics Panels and Amazon Mechanical Turk, are available to entrepreneurs seeking to experiment with how to best present their messages as they polish their pitches. Whether founders are seeking to appeal to investors on crowdfunding sites or at pitch events, different types of platforms and panels should allow for more targeted test runs, which can better inform the crafting and delivery of the pitch. Ultimately, these strategies — all of them rooted in tangible data — demonstrate how founders can better position themselves to successfully raise VC money. Through a better understanding how people make decisions, founders can more authentically connect with their audiences. Chia-Jung Tsay is associate professor at the UCL School of Management. 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