In the world of startups, securing venture capital is a vital step, and nailing the pitch is crucial. One key question often arises: should the Chief Technology Officer (CTO) be part of the presentation when the CEO is the domain expert?
Raising VC funds to grow their business involves thorough preparation, including selecting a company representative. Despite the focus on technology in startups, convincing VCs involves more than just numbers, ambitions, and the team; the technology itself holds significance.
Although no set rules exist, insights from successful startups that Silicon Luxembourg recently interviewed suggest several best practices for this process.
Salonkee co-founder and CEO Tom Michels stresses the importance of collaboration between himself and the company’s CFO, Samuel Faber, during their fundraising efforts. Notably, “the engagement with venture capitalists (VCs) occurred after a comprehensive due diligence process and involved interactions with all founders and top executives”. This demonstrates the strategic approach taken by Salonkee in coordinating its fundraising activities.
In the opinion of Kevin Muller, co-founder and CEO of password protection firm Passbolt, having a weak management team ranks among the top 3 reasons for startup failures. Consequently, in a fundraising process, the quality, robustness, and experience of the leadership team, including the CTO, are “undoubtedly key factors that VCs consider to mitigate investment risk”. Starting with the pitch deck itself, the credentials and experiences of both the CTO and each member of the management team should be clearly emphasised.
“Drawing from our own experience at Passbolt, it’s not imperative for the CTO to be present during the initial introduction calls, which often revolve around high-level market positioning, vision, and growth KPIs. However, the more technically intricate the project, the sooner in-depth technical discussions will arise, necessitating the CTO’s involvement”, details Muller.
The CTO should not only showcase the appropriate skills and experience but also exhibit a strong alignment with the rest of the management team and a complete synchronisation with the execution of the business plan and deliverables. For example, if the CEO advocates for a “move fast and break things” approach while the CTO leans towards perfectionism, this misalignment may become apparent during discussions with investors.
To delve even further into the role played by the CTO, Next Gate Tech‘s Semin Ibisevic shares with us his best practices after several successful fundraising rounds, including the latest one in April.
“I believe that the CTO should indeed, together with the CEO, represent the company and actively take part in discussions with venture capitalists on topics such as raising funds. In fact, any investor will miss out on not having one or the other taking part in the pitch, comments Ibisevic.
Based on his own experience—it is crucial “to showcase to venture capitalists that the company cannot only talk the talk but also walk the walk – a lofty vision is worth little without a tangible plan to execute on intermediate targets. On the flip side, a perfectly executed solution is practically worthless if it does not serve a customer need or cannot successfully be brought to market”.
Here, the interaction between the more detail-oriented, inward-focused CTO and the often more outward-looking CEO is key, and the stronger the collaboration between the two, the greater the likelihood of success.
Continuous dialogue and trust are key factors in this, stresses the CTO. “Davide and I rarely—if ever—schedule meetings; nevertheless, we maintain a constant awareness of every aspect of the business while simultaneously focusing on different elements of its operations”.
“The CTO should, along with the CEO, be part of discussions with investors to gain a better understanding of the questions asked and the guidance provided by experienced stakeholders in shaping the product strategy”
Semin Ibisevic, Co-founder & CTO of Next Gate Tech
Secondly, “the synergy created from the blend of skills, experience, and diverse perspectives, enhances the product’s strategy and ambition”. Topics such as scalability, reliability, cost-efficiency, and product quality can, and should be, addressed and challenged.
“For instance, well-informed investors will ask about new opportunities (e.g. the use of generative AI) and potential future use cases, and how the company can continue challenging the status quo to expand the addressable market. Optimising cloud resource costs, on the other hand, can significantly impact profit margins and overall company profitability”, details Semin Ibisevic. “Additionally, existing or upcoming industry requirements (e.g. information security standards and compliance) need to be taken into account in the technical design, while at the same time not slowing down innovation and growth.”
In all these cases, the best solution is found when working in tandem or as a team, preventing the outcome from leaning too much towards either the technical or business side.
If nothing else, “the CTO should, along with the CEO, be part of discussions with investors to gain a better understanding of the questions asked and the guidance provided by experienced stakeholders in shaping the product strategy”. By gaining such insights, the CTO is better able to guide the tech team towards a product delivery that is aligned with the company’s long term vision.
“All in all, both the CTO and CEO bring a different but very much complementary perspective to the funding discussion, and together, the two make an ideal pairing in VC pitches”, concludes Next Gate Tech’s CTO Semin Ibisevic.
This debate holds valuable insights for crafting a winning pitch team.
- The “Two-Minute Bio” Rule: A concise team introduction is pivotal in maintaining investor interest. Lengthy introductions can backfire, diverting attention from the main presentation. To avoid this, each team member’s bio should be brief, focusing on their core expertise.
- The Power of Less: A balanced pitch team is essential. While the CEO excels as the visionary, having the CTO present can provide technical depth. This is particularly effective if the CEO’s strength lies in marketing and sales. The team’s composition should prioritise active contributors over egos.
- Transparent Communication: Deciding the pitch team can lead to hurt feelings. It’s vital to communicate transparently with team members not included. One-on-one conversations explaining the rationale behind these decisions can prevent misunderstandings and foster a culture of open communication.
In summary, a startup’s VC pitch requires a well-structured team that embodies its vision and expertise. While the CEO remains the primary storyteller, the CTO’s inclusion can add technical credibility. Striking the right balance, transparent communication, and fostering a collaborative team dynamic contribute to a successful pitch that captures investors’ attention.
