Platitudes and PowerPoint Make VCs say “No”

Scott Stanford, co-founder of Sherpa Capital, has some advice for founders pitching to VCs: Don’t try to sell.

A pitch that tries to sell is weak, and seeds doubt in a VC’s mind. “We look for founders who are not trying to sell us,” he told attendees at Lisbon’s Web Summit. “You want to be bought.”

Who Was Giving the Advice

Stanford wasn’t speaking as a bystander. He and Shervin Pishevar founded Sherpa Capital in San Francisco in 2013, and both were early investors in Uber. Stanford had backed the company while still a managing director at Goldman Sachs, before the two left their jobs to start the firm.

By the time he took the stage in Lisbon, Sherpa had money to put to work. In June 2016, the firm announced $470 million for two new funds: about $172 million for an early-stage fund, Sherpa Ventures II, and the rest for a mid-stage fund called Sherpa Everest. That followed a $154 million debut fund.

The setting mattered too. 2016 was the first year Web Summit was held in Lisbon after five years in Dublin, and about 53,000 people attended. A room full of founders hunting for funding was exactly the audience for a talk about why investors say no.

Why VCs Say “No”

Some other reasons you might be hearing “No”:

• You haven’t built anything. “If you come to us with a great idea, you are dead on arrival. Ideas are free. Ideas are basically worthless.”
• You’re desperate. “We smell desperation right away.” Meet investors casually … before you run out of money.
• You’re using buzzwords. Once you get into the pitch, “You have to break through the noise,” says Stanford. “Break out of platitudes. If we hear one more time, ‘We are the Uber of …’”
• You have a PowerPoint deck. Just bring data, Stanford recommends. If you do not have data, get other people’s data.

The best way to attract a VC? Succeed without us. -Scott Stanford @sherpa #WebSummit

— Adryenn Ashley (@adryenn) November 9, 2016

Great advice from Scott Stanford of @sherpa "Ideas are basically worthless. Bootstrap it until you can show us data" #websummit

— Torben Andersen (@TorbenAndersen) November 9, 2016

Reading Between the Lines

Each of those points comes back to the same idea. Investors are trying to judge risk, and anything that looks like hiding it makes them nervous.

A working product, even a rough one, shows a founder can execute. Ideas really are cheap, because many people have the same one at the same time. What separates them is who actually builds it and gets customers to use it.

Desperation is a problem because it hands the investor all the power and suggests the company’s finances are shakier than they look. Meeting VCs early, when there’s nothing to ask for, also lets them watch a company make progress over months. That track record is more persuasive than any single meeting.

The “Uber of X” line is a pointed one coming from early Uber investors. By 2016, so many startups had described themselves that way that the phrase told an investor almost nothing about the business. A clear sentence about what the company does and who pays for it does more work.

And swapping slides for data isn’t about banning decks. It’s about leading with evidence. Numbers on users, retention, revenue or market size give investors something to test. If a startup is too early to have its own numbers, industry data can still show the problem is real and big enough to matter.

Persistence, From Both Sides of the Table

As founders themselves, Stanford and his partners appreciate the work that goes into each startup — they read every email the company receives, encouraging founders to keep knocking on doors.

“In starting Sherpa Capital we have been told ‘No’ 400 times,” he added. “It is like kissing every frog. Kiss, kiss and kiss, eventually you find a prince.”

That’s worth remembering. VC firms raise money too, from pension funds, endowments and wealthy families, so the people judging pitches have usually sat through plenty of rejection themselves.

What Happened to Sherpa Capital

The firm went through a rough patch after this talk. In December 2017, Pishevar resigned from Sherpa Capital after allegations of sexual misconduct, which he denied.

Stanford stayed on. In November 2018, Axios reported that he was forming a new firm with Hany Nada, a co-founder of GGV Capital, which would also manage Sherpa’s existing funds. That firm became ACME Capital, an early-stage investor based in San Francisco, with Stanford and Nada at the helm.

What It Means for Founders

The advice from that Lisbon stage has aged well. Build something before you ask for money, start talking to investors before you need them, describe your company in your own words, and back your claims with numbers.

None of it guarantees a yes. But it gives investors fewer reasons to say no, and as Stanford’s 400 rejections show, getting to yes is often just a matter of keeping going.