For founders, pitching venture capitalists can sometimes be as frustrating as going to the dentist.
At the dentist, they prod inside of your mouth with an arsenal of tools and make judgemental comments about your dental hygiene. But the 30-minute appointment is short, sharp, and only happens every 6–12 months.
When founders pitch VCs, they can be expected to be prodded with no tools, but instead an arsenal of equally uncomfortable questions that have been asked a hundred times over.
What is your traction?
What is your go-to-market?
Why you over Google?
Unlike the dentist, there is not just one 30-minute session but dozens, every week, month on month.
The process is even more frustrating given VC’s penchant to say no and lead you on to further and further meetings — only to pull out at the last minute.
The thought of being like a dentist made me uncomfortable, so I tried to think from a VC’s perspective on how a founder can save as much time as possible when raising money.
All my thoughts can be distilled into three concepts:
- Generate Interest
- Recycle content
- More interest, more content
Founders have a lot to learn from a rug salesman. Every rug store is always having a closing down sale. Creating a sense of urgency, whether illusory or not, is a powerful tool to generate interest in your company.
It’s fairly obvious but worth stating: the more interest in your company, the less time you have to spend fundraising. There are a lot of great founders who run fundraising processes that stretch out for half of a year and fall for the cliche that fundraising needs to be your full-time job.
Some companies close rounds in weeks, some don’t even make a pitch deck. The companies that do this are almost always ones that understand investor psychology.
There are a few levers you can pull to do this.
For example, FOMO or fear of missing out, is a powerful one that you can use. Some investors lose sleep on the thought of missing the next unicorn. This makes them susceptible to the fallacy of herd mentality — when people are influenced by their peers to adopt certain behaviours on a largely emotional basis.
For VC’s this happens when all other VC’s seem to be interested in a start-up. It is often easier to rely on the crowd than form a view based off first principles.
How can you leverage this ethically?
Get other investors to make introductions for you. Try and get prominent angel investors on your cap table and finally be confident. Investors have a 6th sense for when a founder is despondent because there is not much investor interest.
When you raise money, you will likely speak to at least thirty investors. As much as we like to pretend that we are different, the majority of questions will be similar.
It takes a lot of time out of your day to take meetings/email threads to explain the same thing over and over again. Why not just recycle content?
Record a 30-Minute Pitch & Product Demo
The joys of video calls are few, but one is that you can do the pitch once and then make an infinite number of copies to send to investors. This will save you a lot of time.
Investors often take first calls to sniff around and see if something is interesting — you could take hundreds of first calls if you accepted every invitation. If the investor doesn’t want to have a first call after seeing your pitch, they probably never would have invested anyway, and you just saved 30 minutes.
It’s also great because you will likely be pitching multiple people at the same VC at different times. By having a pre-recorded pitch you can circulate it around to them, so that the whole team can get up to speed quicker.
In an ideal world, time spent with investors should be more about relationship building than pitching.
Make FAQ Notion
Most investors ask similar questions, so it’s best to make a list of the most common ones you receive and write the most convincing answers you can. You can then put this on a notion and share it around with investors.
Here are the key areas you want to flesh out:
# of customers:
It might seem like a lot, but because it’s recyclable, you only need to make it once, and it serves all.
More interest, more content
Investors see hundreds of pitches. Most say no to 99% of companies they speak with. This ‘no’ can come before a meeting, after one, or even after four. It’s a very similar process to dating.
As a founder, you should have a system for temperature checking the investor’s excitement to save yourself time. If the signals are not positive, there is no point in going on a second date.
It’s counterintuitive but you want to get as many no’s as quickly as possible, so you can double down on the actual prospects.
A good way to temperature check is by only giving the investor more content as they start showing commitment.
It might feel weird, but it’s completely okay to make asks of your investors.
Typically, there are three stages of content that you give an investor.
- Pitch Deck (5–10 page slideshow on your business)
- Questions (Ad hoc questions about the market, team and product)
- Data room (Financial statements, supporting documents, market research)
You should only give content after you get interest. This is the golden rule.
Let’s see how this unfolds in the real world:
Investor: Hey XXXX, can I please have a look at your pitch deck or learn more about what you do?
Founder: Sure, would love to but do you mind if I learn a little more about you and your fund, to see if we would be a fit for each other? What is your investment thesis, what is average cheque size, what do you find interesting about the company …. Etc.
Investor: Yep sure, here is that info.
Investor: Loved to hear the story and see the deck, just had a few questions about Y.
Founder: Was great to chat as well! A bit snowed under but will send answers to you tomorrow. Would love to get your feedback on our company and how you think it would fit into your investment thesis?
Investor: Loved your answers, can we have a look at the data room?
Founder: Yep sure will send now, do you mind making an intro to XXXX, they are a potential customer and we would love to have a chat with them.
Each of these answers is polite yet also make the investor commit some time before you give them content. It’s perfect because some investors may be going through the motions and lack conviction in your company. The small hurdle will be enough to filter your prospects to the ones who are genuinely interested.
When an investor is excited about your company, they will go above and beyond to answer these questions and make introductions for you.
Good luck on your fundraising process and always feel free to learn more about us at www.aura.vc