What investors really look for in your pitch

Marc McMorris is Co-CEO and Co-Chair of the Investment Committee at Carrick Capital Partners, where he is directly involved in the identification, selection and post-investment growth guidance of the firm’s portfolio companies. In a recent conversation, he detailed his career, his work, and how entrepreneurs can prepare to be successful at their next pitch meeting.

How did you start investing?

I graduated from the Wharton School of Business with a degree in finance and initially went into investment banking at Morgan Stanley and then Goldman Sachs. In fact, my investment career began when I had the opportunity to join General Atlantic, which is now a large private equity firm. At that time, it was quite small, but quite well known within technology. Eventually, I was asked to run the Palo Alto office for General Atlantic, and after that I left to co-found Carrick Capital.

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What is the most rewarding part of investing for you?

I began to realize that, for me, the interesting part of the deal happened after the transaction—How do you integrate? How to scale a company? How do you build your operations? And, you know, when people think of finance, they think of Excel spreadsheets and the like, but really, it’s about people. It’s about developing relationships and managing relationships. I say jokingly – but sometimes there’s truth to it – when you’re working with the CEOs in your portfolio, sometimes you’re a colleague, sometimes you’re a psychiatrist, sometimes you’re the director, sometimes you’re a friend. I actually find this kind of interaction very interesting and rewarding.

For the entrepreneurs reading this, what are some of the things you look for when you hear a pitch?

There’s a long list of things I’m thinking about, but there are three specific things I’m always looking for. One is understanding the addressable market opportunity or TAM. The second thing I look for is what I’ll call improving metrics. Is the company improving in product development, sales, and marketing efficiency? Is there a trend where I can see improvements and extrapolate from there? And the third thing is to understand an entrepreneur’s view of exit. What do they want to happen? Are they convinced they will be the next hottest IPO? Because to achieve this, a certain risk curve is required. Are they planning to sell the company in the next five years and then retire? Those are the three big things that help an investor figure out whether or not an opportunity matches their investment criteria.

What are some things you wish entrepreneurs understood about the investment process that many don’t?

Many entrepreneurs have a narrative of their business and how their business can be successful. But often they don’t tie the narrative to actual data. And when that happens it means we have to dig in and figure it out and that puts the business owner in a position where they are “explaining”. Another point: when a company is being sold, one thing you will often see is that the owner or management team has invested little in the last couple of years to improve their profit margins. Any seasoned investor knows this, right? It’s not a facade that works. I am often amazed that people still follow this type of strategy.

Related: Would you say no to a $2 million investment offer?

What would you advise entrepreneurs frustrated with investors saying no thanks?

There is an analogy here with baseball. A great baseball player hits .300. They don’t reach 0.800. This is the world an entrepreneur really has to deal with. You can’t get too turned off by a “no” because there are many reasons why you might get that no. It is not just about the entrepreneur’s business, but also how this business relates to XYZ Company’s investment strategy. There may be companies that I look at and decide we’re not going to invest in — and it’s not because I really don’t think it’s a good opportunity. It may be that the risk is different from what we are willing to take. I advise you to go online and look at an investor’s website. Look at the portfolio and see what is interesting for this group. The other thing I would also say is when you get a no, you have to look in the mirror. I’m hearing no, why don’t they buy the market opportunity? Because they don’t believe the business model works? Or is it me? You won’t necessarily improve your batting average, but you do need to know which components of your business are unlikely. I’m very honest with my feedback, so my advice is not to get defensive, but to take any negative feedback as data to build on.

How does an entrepreneur with no connections reach investors like you?

The first part is that you have to do your homework. You can lose a lot of time if you take a shotgun approach to investors. So really trying to figure out which investors are the right bucket for you to target is really important. The second part is a little difficult because the honest truth is that investing is like most other businesses, it is very relationship oriented. Therefore, it is very difficult to send a cold email to a partner of a private equity firm that you do not know. I suggest finding someone from that company on LinkedIn and trying to build a connection there.

Related: The Secret Behind the Pitch That Generated a $200,000 Investment

When you do something that goes well, can you describe that feeling of satisfaction? Obviously, there are financial rewards, but is there anything more to it than that?

In fact, there’s much more to it than that. When you go beyond the numbers, as I mentioned before, it’s people on the other side. So when we’re investing, we’re typically investing for years. And you develop relationships. Not just with the CEO, but with many senior team members. So it’s extraordinarily rewarding when that team wins. It can be a financial shift for some, so it’s a great feeling to know that you were a part of that victory.

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