If you are indeed investor-ready, then it’s time to take these key steps before you approach your first venture capitalist for an investment. And you do have a warm introduction to this VC, right? If not, go back a step and get one!
- Review the investor’s portfolio, which is virtually always on their web site. Are any of these companies competitors to you or potential competitors? If so, you should steer clear, as the only reason you will get the meeting is to have their partner gather information about you, for them.
- Are you at the right stage for this fund? Some funds primarily do follow-on rounds, they virtually never do seed stage. Make sure you are at the stage that is a fit with your target investor.
- Is the timing right? VCs, like founders need to raise capital. You don’t want to target a firm that’s closed out their first fund and is in the middle of raising capital for it’s next fund. Or a firm that has invested virtually all of its fund already. You may need to ask the partner the stage of their fund, this is not publicly available information.
- How much runway do you have? It can take 6 months to raise an institutional round. You might need to raise friends and family capital first, if you haven’t already. Or perhaps you start with an angel round. The cardinal sin in startups is to run out of cash! And you don’t want to be negotiating with a VC from a position of weakness because you cash is about to run out.
- Brief your team. They should know what firms you are approaching and which partner in those firms. You never know when a VC’s path will cross with one of your team’s.
- Create a killer two-sentence summary of your firm to go in the body of your email.
- Create an exciting one page summary of your business, including the team, your market opportunity, and secret sauce. Don’t forget your contact info!
- Come up with a good subject line for your intro email. Such as “Bill Jones recommended we talk with you” where Bill Jones is the person giving you a warm intro. Obviously, if he’s gone as far as sending you both an email, then the subject line would be “Following up on intro from Bill Jones.” VCs get a lot of email! Don’t let yours get lost due to a vague subject line.
- Do not send your pitch deck. Even if they ask for it. Politely explain the deck has been designed to support your presentation, not stand in for you. You want to use the one-pager to get the investor meeting, where you will be glad to present the deck. If you really want this meeting and the VC is adamant about wanting your deck first, you can one of two things: one, walk away. That may actually impress the VC; or two, craft a more detailed deck that can standalone as a document presenting a complete view of your business. But keep in mind, decks get passed around, do you want that? Better that your one-pager gets passed around.
- Do not specify how much money you are asking for! It may be too much for the fund you are targeting or even too little. Don’t give them the opportunity to use that excuse to ignore your email or follow up phone call. Once you get into the meeting your ask will be the last slide in your deck.
- Last and probably first: talk to some founders who have received funding from this VC. Do they think you are a fit with their fund? Do they recommend the VC? And most important, how does the VC act when times are rough? Read my post Founders need to perform due diligence on prospective investors.
So we’ve done it the Spinal Tap way, turning up to 11! There’s more to say, such as rehearsing for a phone call to or from a VC, but we’ll stop here so you can get going.