4 things you should do before meeting with venture capitalists
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Getting a meeting with a venture capitalist is notoriously difficult, but there is such a thing as being too fast to get connected. If you aren’t properly prepared, you can burn your one shot to make a great first impression.
From the moment you make it public that you are seeking investment, you turn over an hourglass of about six months. You should be able to get all the funding you want in that time, or investors will begin to worry about why you’ve taken so long. Meeting venture capitalists and raising venture capital isn’t something you should do on a whim, you should be as prepared as possible to maximize your chances of success. Throughout the six months, you will want to focus on talking to investors, not doing the things you could have done before.
Here are the four things you should do before approaching any venture capitalists.
Know that you are ready
The world of pitching can be brutal, and there’s no space for hesitancy. You must believe 100% you are ready, or the potential investors will sniff your uncertainty.
For first-time founders, the difficult question is: How do you know you are ready? It’s hard to dispel doubts when you feel like an imposter, and believe me, we’ve all been there. The crucial thing is being clear on what your startup’s story is. What problem does it aim to solve? How does it do this? What is so unique about you that other companies can’t simply replicate your idea?
When you’re ready to start approaching and meeting with venture capitalists, you’ll know your story so well that you can articulate it into a simple solution sentence. Practice it until you know it so well that it feels like it is part of your DNA. Here’s the template:
“We’re doing X (solving a problem) for Y (a specific audience) by Z (what is your solution?)”
You should also have a clear plan of exactly how you will use any money you invest. They are taking a calculated risk and need to know what the next steps are so their money is not squandered. Have a precise number you want, in which areas the money will be used, and most important, what KPIs (Key Performance Indicators) can be achieved with the funding and for how long.
If you can do these two things, you’re well on your way to being ready to contact VCs.
Do your homework
You’re competing against some of the world’s brightest minds for funding and VCs are flooded with high-quality requests, so you need to get the basics right. Misspelling someone’s name or misgendering them shows a lack of care and eye for detail. It could mean your email is instantly moved to their junk folder as a result. A VC once told me that they see so many great companies, they look for the little flaws as a signal to say no. Take a little extra time to make sure you get the small details right.
Before approaching any investor, you should make a hit list of whom you want to talk to in a spreadsheet. Collect all their relevant information here. You want to answer the following questions to ensure they are even the right people to contact:
- What vertical do they invest in? – Don’t approach an Enterprise SaaS investor if you’ve created a dating app, for example.
- What stage do they invest in? – Some venture capitalists will only invest as a company is in the later rounds of funding or when a company is close to IPO. If you aren’t there, then you’re wasting everyone’s time.
- What geographical region do they invest in? – Don’t waste your time crafting a pitch to someone who never invests outside of Silicon Valley if you’re based in London. Yes, COVID-19 has shuffled the cards on this, so you can try, but focus first on investors in your geographic region or who are looking to invest in your region.
- Who’s in their portfolio? – You want to be sure that you aren’t competing directly with anyone in their existing portfolio. It puts them in a conflict of interests and if they can’t see any synergies, they will pass on you.
In addition, be sure to check out their website and any interviews they have available online. It can give you an insight into their style and personality, so you approach them in the right manner.
Build your network before meeting with venture capitalists
A common mistake of first-time founders is trying to go directly to meet a venture capitalist without first engaging in the wider community. If they’ve already heard good things about you from someone in their network before they’ve talked to you, then you have a huge head start. You get points for how you land on their desk. Venture capitalists are human and, like everyone else, the opinions of the people they trust affect their decision-making.
You should be actively connecting with trusted advisors in their space, other investors, and most importantly, other founders. One of the best ways to meet a venture capitalist is through someone they’ve already funded. The founder who introduces you will have been through the exact same process and will have a strong understanding of the investor’s personality. Alternatively, if you’re not the right fit for an investor, but they like you, they can champion you to other investors and get you in the door.
The important thing is to create organic relationships where people do not feel as if they are being used. You should bond with people over your shared passions and add value wherever you can.
Hopefully, you’ll find people with the “pay it forward” spirit and then get into the karma game when you’re on the other side.
Make a teaser deck
Some founders try to have their entire pitch deck ready before they even think about meeting venture capitalists, but in reality, things change so fast that your deck will be out of date quickly anyway. Instead, focus on building a teaser deck of just five to eight slides. Send this with your pitch email to give a potential investor a better idea of what your company does without needing to contact you.
This works because you’re making their life easier. Rather than needing to look you up or to arrange a meeting, they have the information they want available to them straight away. The brevity is crucial, so you don’t make too high a demand on their time. It should include a great intro blurb that you hope will excite any investor who opens it.
As well as making the investor’s decision easier, it also saves you from meeting with an investor who isn’t a right fit. This stops you from chasing dead ends, and you know if someone has read it then they are a hot opportunity because they already know enough to make an informed decision.
Move thoughtfully and build relationships
When it comes to innovation, “move fast and break things” is a great mantra, but the world of investment isn’t quite the same. You might only get one chance to meet the venture capitalist who could transform your business, you don’t want to blow it. Prepare in advance, and you’ll reduce the possibility of mistakes and increase your chances of getting that all-important funding.
Donna Griffit is a storyteller and pitch alchemist who has helped hundreds of global startups and VCs raise over a billion dollars. She can be found online at www.donnagriffit.com.
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