Written by Clairine Runtung
You’re sitting in the waiting room at a deliberately welcoming office space of a venture capital firm, your fingers swiping across the slides of your pitch deck on your phone trying to make sure it’s all there – every aspect of the last few months of hard work, illustrated in the impossibly concise 12 slides. In the back of your head, you’re calculating how many hours of reaching out to the partners, associates and maybe even the office manager of this VC to finally get to this point.
It really would be a shame if you blew it now.
This is how an entrepreneur described the beginning of what would become our fruitful two-year (and counting) relationship as startup founder and investor. In 2017, I met with over 200 founders and invested in less than 10. That is to say that approximately 95% of founders that we meet are turned down, despite how smart they are and/or how prospective their business may be.
As many of us have to filter through many ideas and businesses every year, we develop heuristics that help us categorise startups into either a “let’s take a closer look” or a “let’s pass for now” bucket. One set of these heuristics are the pitch meeting red flags that alert us to question the competency or compatibility of the entrepreneur.
This is not a universal cheat sheet – rather I hope for it to help founders of startups be more tactful in these elusive meetings. Here are 6 things that will probably backfire on you in a VC pitch meeting.
1. Don’t be rude
I would hope that this is a common sense that does not only apply to investors meeting but also to your interactions with anyone in your surroundings. Sadly, I’ve encountered founders who chose to act impolite to other members of the team. Remember, VC teams are often small in size —everyone you talk to is part of a tight-knit group. If you look down on or are rude to an office assistant or an analyst, chances are words will spread to the rest of the team. While this is not a deal breaker per se, good behavioral attitudes can only benefit you.
2. Don’t disregard your competition
If you didn’t have any competition, shouldn’t this concern you? Either the market is too nascent, thus no players have persisted and succeeded, or simply, you have not looked hard enough. Having no competition is not an answer to justifying your business’ competitive advantage. You need to do a deep dive assessment of who the existing players are in the market, even if their revenue models are not comparable to yours. I would suggest creating a competitive 4 by 4 matrix to map out your competitors.
3. Don’t come unprepared for the obvious questions
VCs are known to have a short attention span — our brains are designed to synthesise information, filtering out the unnecessary and taking in the important ones. It is absolutely understandable if you do not know the answer to what some inquiries we are asking during the introductory meeting, but if you can’t answer 80% of the time, chances are you are projecting an impression that you are not familiar enough with what you are building — when you really should. I’m not suggesting that you lie or pretend you know the answer when you don’t. Rather, I’m suggesting that you should figure out the most common questions that will be asked during the meeting, and know your numbers and explanations by heart.
4. Don’t expect an immediate decision
I am pretty sure there were occasions when founders refuse to leave the meeting room when they do not hear that “Yes” straight away. I’ve met entrepreneurs who would drag the meeting out only to hope that they will get the affirmation answer. The truth is, you’ll only annoy the investor and waste your time – even if you hear a Yes, anything can be said verbally and NOT definitively. You have to understand that there is a process to everything, especially when it is pertaining to an investment decision. Do not demand a Yes straight away. Instead, ask politely when you can follow up according to their timeline.
5. Don’t insist on meeting the Partners at the first introductory meeting
While Partners of a venture capital firm are indeed the decision makers, you should follow through accordingly with each firm’s due diligence process. In addition to meeting entrepreneurs, Partners work on building the venture capital business in general (which may or may not include fundraising—a lengthy process, as you know it), managing current portfolio companies, networking at conferences and other events, to name a few.
In most cases, you’ll need to meet the “gatekeeper” in the investment team, either Analyst, Associate, Manager or Principal, before meeting the Partners. Insisting on meeting the Partners right away when you have been referred to another investment professional member of the team won’t help you secure an investment. Trust the process.
6. Don’t claim you (or any of your team members) are full-time … when you are not
Honesty is key in doing business. Tech-VC industry is not an exception. While it is preferable for founder and co-founders to be full-time especially when fundraising period starts, sometimes it is understandable when one or two members of the founding team is not full-time yet or in a transition of being operationally full-time entrepreneur.
Being transparent about this matter is recommended rather than a bluff up front. As Alex Taussig, Partner at Lightspeed Venture Partners said, “VC has a lot in common with investigative journalism,” – being deceitful can be harmful when fostering a trusted relationship between VCs and entrepreneurs.
The truth is, the best meetings I have ever had as a VC investor are the ones which didn’t feel like an interrogation. Rather, I walked out of the meeting having learnt something new about an industry, a business model, a story, a mission that I was not aware of previously.