What Investors Wished Founders Knew
You had an amazing meeting with an investor. Your product demo crushed. The dialogue was great. They told you how much they loved your space. The meeting was only supposed to last 45 minutes but you ran 90. The assistant tried to end the meeting twice but was shooshed away.
You race back to the office to tell everybody how well it went and you wait for the follow-up call, to have a partners’ meeting or talk about term sheets or at least dip into due diligence. One week. Two weeks. Oh, fork. What do I do now?
This is a very common scenario when entrepreneurs pitch VCs, and frankly, is a very common scenario when VCs try to raise money from LPs. It’s predictable, there is no reason to get mad about it, and with a well-designed playbook you can overcome this much of the time.
I call it: “Remind me why I love you again?”
When you pitched me, I really did love you. I was amazed at your innovation, approach, cleverness, enthusiasm, leadership traits, background, education, team – everything.
You left the meeting dreaming about money and finally having resources to do all of the things you wanted to do. I left the meeting and had to attend a three-hour board meeting where two founders have been fighting and each want the other one fired.
After my board meeting I had to do an interview with a CFO candidate that one of my portfolio companies asked me to speak with. I then had to review a nefarious IP lawsuit filed against another company, and help the CEO figure out whether we should just pay it or join forces with the other companies named and fight it.
At night I had a group dinner where I met six new entrepreneurs and hung out with some old friends from law firms, banks, and other VC funds. I raced home to put my kids to bed, say hello to my wife and then spend a grueling administrative hour doing email. I had a nice “thank you” note from you and remembered that I had something exciting to look forward to working on.
But it’s only Tuesday. Sigh. Wednesday I have four companies coming in to talk about their companies. Some were interesting, some weren’t. I also had to negotiate a follow-on round at a portfolio company because new investors were trying to force a bit option-pool top-up that would dilute the founders and existing shareholders and existing investors were fighting over pro rata rights.
Rinse and repeat for 10 days, and I keep reminding myself that I’ve got this to-do list of new deals to stack-rank and there was that company I had seen and liked a couple of weeks ago. But I have to catch a flight to New York for a two-day computer vision conference and two board meetings, two board dinners, and a catch-up with my LPs to tell them how our fund is going. I fly home Friday night, weekend on the soccer field with the kids, and head into a Monday partner meeting that will be contentious because there are two controversial investment decisions to make.
A few weeks have slipped by. I know you emailed me and I emailed you back. I asked you to send over some cohort data and I did get 30 minutes to go through it the other night. I developed a list of questions to ask you next time we speak – especially about churn rates and your high CACs last quarter relative to the previous year. Was that a blip?
18 days later we hop on a call. I have a 30-minute window between other calls but I really want some time with you. We hop on the call and walk through the spreadsheet and get lost in the weeds.
Weren’t you the one who went to… oh, no. That wasn’t you. You went to Wash U. I remember. But your co-founder had been senior at one of the big enterprise software companies, and if I remember correctly American Express had run a big pilot with you. I think? Right?
I know this sounds exaggerated, but this is the life of an investor. Frankly, it’s the life of any executives with whom you want to sell product, do a business development deal with, execute M&A, a journalist you want to write about your company – anybody.
Because you have a unitary focus on “financing your company or you die,” you seem not to miss a beat in thinking about the last meeting, but the funder has been whipsawed in 20 directions. I call this the “love decay,” and with every passing day it depletes just a little bit more.
If they loved you on the first meeting, chances are they will pick up right where you left off, but you have to find a way to get back in front of them again. Raising money is about a series of engagements where in each instance the investor gets to know you better, gets comfortable working with you, sees how you think, sees how you follow up, gets answers to his or her questions, and starts to imagine what this working relationship could and would really look like. And frankly, you get to see the same in reverse of them.
But how do you get back in front of the investor? They will always tell you, “don’t worry, a phone call should be fine.” It is never fine. You can’t remember why you loved somebody over the phone. It doesn’t have the same energy or chemistry. On a phone call it’s too easy to be distracted and thumb through paperwork, stare out the window or glance at your computer screen. On the phone, the shooshing admin will win the battle and whisk you on time to your next meeting.
Your job is to break the convention. Your job is to find a reason why the investor needs to see you again.
“In our last meeting you asked me about our cohorts and why retention went down. I worked on a new model and I’d really love to show it to you in person. It’s hard to completely grok reading it. Can I please just get 30 minutes of your time? I’ll come to you and promise to be fast.”
“Last time we met I didn’t have my CTO with me. She was one of the lead engineers at Uber. I think you’d really enjoy meeting her wether you decide to invest or not. Would it be alright if I brought her by your offices for a super quick coffee?”
(In fact, my personal fundraising strategy is to attend the first meeting by myself. That way when my partners in are in New York, Chicago, Boston, etc. there is a reason for us to re-engage, because they never met that partner before. If three of us go to the first meeting, there’s no reason to have a follow up meeting six weeks later!)
Or maybe your strategy isn’t to go pitch them again, but rather to invite them to an entrepreneur dinner that you’ve organized in the private room of a local restaurant, and you’d like to invite them to meet 12 other startup founders. You’re the host so you lead the table discussion, seat placement and follow ups. You’re in control. And you get to demonstrate your skill sets without even pitching.
When you get the room you have the chance to remind them why there was magic. You get to show them your enthusiasm, you get to ask questions about their process, you get to judge whether they’re “feeling it” by looking them in the eyes.
I always tell people that fundraising is a sales process. The investor has money and the entrepreneur is selling ownership in his or her company. But the real product being bought or sold is trust. Trust that you can deliver on what you say you’re going to do, trust that you will follow up when you say you will, trust that you will be a pleasure to work with, trust that in good times and bad you’ll be committed to making the investment valuable.
And there is no shortcut, no collaboration tool, no spreadsheet, no web conference tool that can build trust even remotely as effectively as being in person.
If you didn’t have chemistry on the first meeting, it may not be able to be salvaged. Sometimes there just isn’t a fit. But if you had a cracking meeting and know that they loved you…don’t take the love for granted. Get back in front of them and remind them why they loved you in the first place. Again and again and again until the cash is in the bank.