When Raising Venture Capital Preparation Matters. The Basics.

Let’s assume the CEO of startup A has finally managed to get a meeting with a VC that has been on the short list for a while. The pitch is ready, time to prepare the meeting. Here is an outline of three topics of what I consider to be the bare minimum of preparation:

Who are you dealing with?
Find out what type of VC you are pitching to and what the role of your counterpart within the VC is.

Did the VC just raise a new fund?
Do they have funds to invest (yes you should check this)?
How does the investment scope correlate to the current portfolio?
What is the average investment period before exit?
Who are the LPs and what could they possibly be looking for?
What are portfolio companies saying about the VC?
If you get funds who will sit on your board?

Try to meet with senior level management / partners as they will be the ones fighting for your ‘deal’. Do not let your advisors, in case you have advisors, meet with investor without the founder/ CEO attending the meeting. A typical VC will think you are not serious and just wasted some precious time. Depending on the round and geography you should ask yourself if you want your advisor to reach out or if the founder/management team does so.

The Introduction and NDA
It has been said and posted many times but I will repeat it here — it is best if you are introduced via a portfolio company, other VC, big name in the industry and so on. The idea is that if you are active in your field of expertise you will know the relevant players on a personal level. I couldn’t find statistics but asking around it is interesting to note that most portfolio companies started with an introduction through a shared connection.

If you can avoid it do not ask for an NDA. Especially for professional investors ideas really are a dime a dozen. A typical VC might receive 1000+ business plan per annual and scan through hundreds of them. Your idea is usually not unique. You should think of it this way: If you have approached the right investor changes are they already know and understand 98% of what your company does. They will have the same or better level of expertise. And they do not benefit from sharing your deck with everyone. It could even signal to some investors that you have no basic understanding of early stage VC type investing. It also sometimes slows down the process and interactions. If you somehow really (really) need an NDA ask for the VC’s default version and do not try to push forward your NDA.

The triangle
Be ready to discuss your pitch deck, the storyline and traction/metrics. In my experience these three sides often do not match up to one coherent proposition. What is said in the meeting does not match with the deck and the metrics so far. Make sure that what you say, present and have achieved so far is logically connected. That way it is a lot easier to understand for the VC and have the discussions that you should have. Also make sure your references are backing up your achievements, including the ones that you did not list as a reference…

For me, and I would say this is true for many investors, personal ambition(s) is also key to creating success stories. Therefore be ready to discuss the end game and what your drivers are and even what your life will look like after the end game. Your cap table strategy should also match your ambition. If you have a company that already is doing well and you want to exit within two years you should probably talk to majority investors.

One last note, surprisingly some entrepreneurs are not expecting to discuss valuation, exits, ambitions et cetera. In order to successfully operate its business model a VC needs solid exits to attract new capital for funds and keep the VC cycle flowing. Without exits the VC model does not work so expect to discuss potential exit scenarios. More importantly be ready to discuss how and why your companies exit strategy is likely to happen.