First VC Meeting
Prepping for the First Date
with Venture Capitalists
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❏ Today I will speak to the subject of First VC Meeting – Prepping for the First Date with Venture Capitalists. One of my responsibilities as an Executive Coach is prepping company founders in the Art of Raising Capital. Yes, I do consider it art. To me, it’s on the same level as painting, sculpting or writing. They each take a combination of relentless practice, personal drive and a degree of timing to become one of the best.
When an entrepreneur or small business person is Prepping for the First VC Meeting – what I refer to as the First Date, they often do a bit of 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 you’ve begun your first date. Guess what? Like most first dates – it doesn’t go so well.
Reason 1: Dead on Arrival – No Money – First VC Meeting – Prepping 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.
Quite often the person you are meeting with is not financially capable of investing. Pitching to people without investable monies most usually happens when you approach family members for funds. My general rule is I never ask family members for money. It’s the best way to destroy a relationship that 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 in your company later when the company is successfully profitable and growing.
Reason 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 has no/insufficient income. Most banks will say “No” when you’ve been in business for less than two years and are not profitable. Most banks looking to make loans require both 1-2 years of steady, growing business financial numbers – and growing profitability. Many investors only invest “after” a company has a growing revenue stream for 6-12 months. Research your investor before you have your first VC meeting, so you don’t waste your, and their, time.
Reason 3: Opportunity – Investor Mismatch
The next goal is that your Opportunity vs. Potential Investor is mismatched. If your business is a SaaS company and the potential investor is a retired real estate developer, you’re miss-matched. Unless your idea solves a problem he/she would be familiar with, you’re unlikely to get monies. People rarely invest in what they don’t understand. If this is the type of investor, you’re first VC meeting, save the pain and cancel the “date.” Identify persons that are well versed in your space. They’ll be able to appreciate your idea and are more likely to move forward and invest.
Reason 4: Not Dressed for Success
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 key – 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, clean, combed hair and for men, a clean shave or well-groomed beard/mustache. For women, stay away from short skirts, date makeup, and perfume. Smell fresh and clean – that’s it.
Reason 5: Presentation is Too Long
I’ve seen investor presentations at first VC meetings that are 30, 50 even 80+ pages long! 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 what problem you are solving.
Reason 6: How do You Make Money?
If you haven’t figured out how you’re going to make money, you’re not ready for your first VC meeting. The days of “getting eyeballs” then figuring out how to make money later are gone. Your business needs a clear direction for generating revenue from customers beating a path to your door for your product. If it doesn’t, stop wasting your time and go back to sorting through Ideas and find an idea that does.
Reason 7: Who’s on Your Team?
Most investors are more likely to invest in a group of 2-3 people than a team of one.
Why? Many reasons. First, what happens to their investment if you get run over by the proverbial bus?
Second, who holds 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), a Technology person (CTO) if technology oriented. If you’re a team of one, you need to identify these people and bring them onto your team. They can be initially in a part-time, unpaid role.
If you can’t identify persons for these critical positions, you’re not going to get most professional investors monies. Strong founding leaders can easily attract heavy-weight co-founders — those that can’t usually are less likely to find business success. Be sure to have a team before your first VC meeting or the outcome will likely disappoint you.
Reason 8: Asking for Too Many $, Too Soon
I recently met with a successful business person. He already had founded a successful business bringing in over $10M/year. So you might think his next idea would be slam dunk right?
His idea needed $20M to build the prototype. The idea was unpatentable. He had no experience in 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. Maybe you need to find co-founders with a long track record in this space.
Getting $20M to build the “first” product is a reach only for the more adventuresome of venture capitalists. You’ll be more successful in raising money if you can prove out your idea with smaller amounts of capital. Say $50K, $250K or $1M. Plus, getting large investments before you’re generating revenue and profit means giving up a large percentage of your company.
Reason 9: Oversharing
Remember when you’re on a social date friends, books or magazines likely suggested 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 friends couch while you’re looking for a job?
Well, it’s the same on first dates (first VC meeting) with potential investors. You need 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.
Reason 10: It’s Not Me, It’s You
Your presentation of any presentation needs to be answering their fundamental questions.
- You need to be clear on What is Your Product/Service.
- Who are your Key Customers and Your Engagement Level?
- How do You Make Money?
- What is Your Revenue/Profit numbers?
- How much money do you need?
- How long will it last?
- What will you accomplish with it, and what will you 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?
- 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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There are many more things that 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 very successful “First Date.”
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My FREE Startup Coaching Newsletter (Link) covers startup problems that I’ve helped my clients solve that you are likely to experience. Topics include choosing the best entity for your startup, finding co-founders, raising venture capital, creating venture capital pitch deck, finding the right accountant and lawyer, creating your startup website, and so much more. I predict you’ll use these newsletters as your go-to-guide when issues arise.
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