Kenan-Flagler’s Twist On The VC Pitch

Ever made a pitch? It can be pretty daunting. Forget about the stage fright and judges. Just try squeezing months of work into a few precious moments.  You’ll whittle your pitch so it’s clear, inviting, and memorable. You’ll crunch mounds of data to validate your market appeal. Most important, you’ll weigh every detail, from your wardrobe to your word choice. In the end, you’re pitching who you are as much as what you’re selling.

That’s how many business pitch competitions are run. Sometimes, you can get so invested in your idea that you lose sight of the bigger picture. In those times, you need to step back emotionally. Not to mention, crafting and delivering a pitch is only part of the process. If you want a VC firm to invest in your solution, you need to understand how associates and partners think – and the expectations and give-and-take that goes into the process.

And that’s one of the keys to the annual Venture Capital Investment Competition (VCIC) hosted by the University of North Carolina’s Kenan-Flagler Business School. Here, the tables are flipped. Real entrepreneurs make their pitches to students. In turn, these students pitch the best solutions to venture capitalists.

“THE PREMIER COMPETITION FOR VENTURE-MINDED AND ENTREPRENEURIAL MBA STUDENTS”

This fresh take on business pitch competitions was launched in 1998 to help students practice venture funding. Sponsored by Square 1 Bank, NASDAQ and Cisco, VCIC is actually a series of 50 competitions that involves 72 schools from 14 countries. After winning their regional competitions, 12 MBA teams compete in the global championship, which is hosted by Kenan-Flagler. This year, 175 venture capitalists and 125 entrepreneurs participated in VCIC (along with 1,200 MBAs), with the championship held from April 10th-11th.

Dubbed “the premier competition for venture-minded and entrepreneurial MBA students,” the VCIC championship features entrepreneurs pitching to  12 MBA teams. This year’s qualifiers included Chicago (Booth), Wharton, Georgetown (McDonough), Duke (Fuqua), Michigan (Ross), Columbia, Oxford (Said), IESE (Spain), CEIBS (China), India School of Business, Washington (Foster), and the National University of Singapore. The judges themselves work for leading venture capital firms, including Andreessen Horowitz, Foundry Group, DFJ, and Venrock Capital.

For their part, Kenan-Flagler also operates a VCIC Fellows program for its students. Here, a select group of students earn academic credit by attending various global competitions and reporting back on best practices. According to Patrick Vernon, who oversees VCIC and serves as Kenan-Flagler’s director of venture initiatives, their students get a unique insight into how the venture system really works. “Not only do they get the educational benefit of observing other top MBA students going through the competition, but they also are privy to a private conversation between the judges, during which the judges talk about the startups and how they would structure a deal if they were on a team.”

“SIMULATES A THREE-MONTH PROCESS IN A DAY-AND-A-HALF”

To say the competition is compact and intense is an understatement. To Vernon, the championship “simulates a three-month process in a day-and-a-half.” This year, the competition technically started at 5:00 p.m. on April 8th (Wednesday), when teams received the business plans for six ventures. This gave each team 36 hours to research the ventures and develop questions and strategies before the “live show.” This is when entrepreneurs begin making 10-minute pitches on Friday morning to the full auditorium. After digesting these presentations, each entrepreneur meets with each team individually for 15 minutes, giving students a chance to ask questions needed to better understand each startup’s market, vision, and value.

On Saturday morning, students participate in what Vernon calls “a partners meeting” with the judges. With the entrepreneurs absent, students assume the roles of associates or junior partners with judges acting as partners. At this point, students pitch their judges on why the firm should invest in the ventures that they’ve chosen. They will review items like achievable milestones, management and marketing, and risk-reward. At the same time, partners will pose questions and scenarios in an attempt to “poke holes” in the students’ logic. “[The judges] want to know the reasoning behind it,” says Vernon. “Partners want to know, “what were you thinking? What was the strategy?”

This process simulates an investment committee meeting held in venture capital firms, where stakeholders are focused on whether an investment will really generate the best return. “It’s not contentious, but it’s very critical,” Vernon points out. “The critical thinking: That’s the job [they] do for each other in-house…to make sure [they] poke every hole before [they] write a check.”

REACTIONS AS IMPORTANT AS ANALYSIS

However, the analysis – and how variables and risk are positioned – is only part of the equation. The competition also tests how students react and adjust to criticism – something they will experience plenty of in committee meetings. For example, say a partner (judge) sees more risk in a startup than a founder does. Does that mean it should be priced differently? In such situations, where right-and-wrong can be ambiguous, it is how teams respond that can determine competition winners and losers.

“If a judge tells you that you did something wrong or doesn’t agree with how you are setting something up, there are a variety of ways you can react to that,” Vernon notes.  “You’re not on a PowerPoint defending a stance, you’re working through it. You might change terms in the term sheet or renegotiate based on the feedback from the partners. You have to decide: Do I want to go to the mat and argue with the judge about it? Or, do I want to take in their feedback and change it?”