VC MEETING – FIRST VENTURE CAPITAL MEETING PREP

VC MEETING – FIRST VENTURE CAPITAL MEETING PREP

Today, I will speak on the 10 CLEVER VC MEETING PREP RULES. One of my responsibilities as an executive coach is preparing company founders to raise capital. Yes, I do consider it art. It’s on the same level as painting, sculpting, or writing. They combine relentless practice, personal drive, and a degree of timing to become one of the best.

When an Entrepreneur or small business person is preparing for the first VC meeting—what I refer to as the first date—they often do some research. They look for what to have when preparing to meet with an investor. That investor might be a family member, a wealthy friend, a local banker, or a venture capitalist. Next, you put together an investor pitch deck on your idea for your fledgling company. Then, you set a date and time to pitch to the investor(s) and begin your first date. Guess what? Like most first dates, it doesn’t go so well.

10 CLEVER VC MEETING PREP RULES

1: Dead on Arrival, No Money, First VC Meeting, Preparing for the First Date

Most studies show that most First VC Meeting first dates are “dead” in the first 60 seconds, often before you’ve even opened your mouth. Why? There are many answers.

Often, the person you meet needs to be financially capable of investing. Pitching people without investable money usually happens when you approach family members for funds. My general rule is that I never ask family members for money. It’s the best way to destroy a relationship you will have for life. If a family member presses, I’ll allow a minimal investment that I know won’t cause financial pain if lost. Otherwise, I’d rather have them mad at me for not allowing them to invest. Besides, you can always let them put money into your company when it is profitable and growing.

2: No/Insufficient Business Income

Another reason is that you are approaching a particular type of investor at the wrong time for your company. Often, this happens when your business needs more income. Most banks will say “no” when you’ve been in business for less than two years and are not profitable. Most banks want to make loans requiring 1-2 years of steady, growing business financial numbers and profitability. Many investors only invest “after” a company has a growing revenue stream for 6–12 months. Research your investor before your first VC meeting so you don’t waste your and their time.

3: Opportunity – Investor Mismatch

The next goal is that your opportunity vs. potential investor needs to be matched. You’re unsuitable if your business is a SaaS company and the potential investor is a retired real estate developer. You need your idea to solve a problem they are familiar with to get money. People rarely invest in what they need help understanding. If you’re meeting with this type of investor at your first VC meeting, save the pain and cancel the “date.” Identify people who are well-versed in your space. They’ll be able to appreciate your idea and are more likely to move forward and invest.

4: Not Dressed for Success – VC Meeting

Even in today’s more casual world, this is a time to “dress for success.” Raising money is one of them. Your first VC meeting is critical, just like any first date. Even if you’re meeting with a “friend of the family,” you should wear business attire. You don’t need a three-piece suit or a $1000 woman’s business suit. Wear dress shoes, dress slacks, and a collared shirt. Have short, clean fingernails, combed hair, and a clean shave or well-groomed beard or mustache for men. For women, avoid short skirts, date makeup, and perfume. Smell fresh and clean—that’s it.

5: Presentation is Too Long

I’ve seen investor presentations that were 30, 50, or even 80+ pages long at first VC meetings! Most potential investors have already mentally slapped the “no” button on your forehead after the first 2–5 slides. I’ve been through 30+ page presentations and still don’t know what the entrepreneur is making. Your first ten words should paint a picture of the problem you are solving.

6: How do You Make Money?

If you have yet to figure out how to make money, you’re not ready for your first VC meeting. The days of “getting eyeballs” and figuring out how to make money later are gone. Your business needs a clear direction for generating revenue from customers, who will beat a path to your door for your product if it doesn’t. Stop wasting your time and go back to sorting through ideas and finding an idea that does.

7: Who’s on Your Team? VC Meeting

Most investors are likelier to invest in a group of 2–3 people than in a team.

Why? Many reasons. First, what happens to their investment if you are the only founding person and get run over by a bus?

Second, who has the other critical skills required to start and run the business?

Most successful startups have a leader (CEO/Visionary/Business Development), a salesperson (VP Sales), and a technology person (CTO) if technology-oriented. If you’re a team of one, you must identify these people and bring them onto your team. They can initially be in a part-time, unpaid role.

You’re not getting most professional investors’ money if you can’t identify people for these critical positions. Strong founding leaders can easily attract heavy-weight co-founders; those that can’t are less likely to find business success. Please be sure to have a team before your first VC meeting, or the outcome will likely be a disappointment.

8: Asking for Too Many $, Too Soon

I recently met with a successful businessperson. He had already founded a successful business, bringing in over $10 million annually. So his next idea would be a slam dunk, right?

Wrong.

His idea needed $20 million to build the prototype. The idea was unpatentable. He needed to gain experience running a business in this new space.

My recommendation? Go back to the drawing board and look for another idea to pursue. Don’t let this be the outcome of your first VC meeting. You may find co-founders with a long track record in this space.

Getting $20 million to build the “first” product reaches only the more adventurous of venture capitalists. You’ll be more successful in raising money if you can prove your idea with smaller capital. Say $50K, $250K, or $1M. Plus, making significant investments before generating revenue and profit means giving up a large percentage of your company.

9: Oversharing – VC Meeting

Remember when you’re on a social date that many friends, books, or magazines likely suggest that you should “focus on the positives”?

Never share that you’re driving your mother’s 20-year-old car.

Don’t share that you’re sleeping on a friend’s couch while looking for a job.

It’s the same on the first date (the first VC meeting) with potential investors. It would be best to answer their top questions (I’ll cover that next), but don’t go into nitty-gritty details. Save that after you’ve determined if they’re interested in their agreement to a second date.

10: It’s Not Me, It’s You

Your presentation, any presentation, needs to answer their fundamental questions.

• It would be best if you were clear about your product or service.
• Who are your key customers, and what is your engagement level?
• How do you make money?
• What are your revenue and profit numbers?
• How much money do you need?
• How long will it last?
• What will you do with it, and what will you be able to use it for in the company?
• How and when will I (the investor) recover my money?
• What are the competitive risks, and who are they?
• Do you know who is on your team, and why will they succeed?

These topics are all your “First VC Meeting” should cover. You want to have an auspicious first date, don’t you?

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Conclusion – VC Meeting: First Venture Capital Meeting Prep

Many more things can sink you into your first VC meeting investor first date. Remember, the goal of any “first (investor) date” is to get your “date” to agree to a “second date” at the end of the first date. If you accomplish this, you’ve had a successful “first date.”

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