So you, budding entrepreneur, have just been invited to meet with a VC. You’ve developed an attention-grabbing idea, you may have an early product model, and – perhaps – you may even have some early traction. But now…you may have no idea what to do for your first meeting with a potential investor. How much do you prepare in advance? What do you cover in your presentation? And how do you continue to capitalize on early interest in your startup?
While every VC is different, meaning each will probably look for different information or traits of a startup before investing, there are certain things not to do when meeting with any VC for the first time:
- Just wing it. While you may think you know everything about your startup, you probably don’t know everything about your market, competitors, the cost to scale your business, the cost to acquire a new customer, exactly how you’ll be using funds raised, or how long it will take you to achieve a certain milestone, as examples. The best way to impress a VC is to prepare in advance for the difficult questions they will certainly ask. Go beyond just sharing your innovative idea – explain why your idea is needed, explain how your idea is an improvement upon current solutions in the market, and explain why your team can bring your vision to life. And, while slides can be a great tool for your presentation, you don’t want to just read them. It’ll be a bore for investors and won’t give you the chance to engage in a dynamic conversation.
- Bring unrealistic projections or valuations. You want to impress VCs, for sure, but unrealistic numbers can actually do the opposite. VCs have a large amount of experience in evaluating startups – they typically have a good understanding of market size, industry growth, and similar companies. Exaggerated projections or improbable valuations can often lead VCs to question just how you’re arriving at those numbers – or to even doubt your credibility. Any numbers you provide need to be validated and supported.
- Focus solely on an exit. VCs are looking to invest in a company that will eventually provide a good return on investment. However, if you begin your pitch by stating when and for how much you’ll be exiting, VCs will often question your commitment to the company. Ari Newman, Partner at Techstars, says, “If you’re asking me for money and all you talk about is getting out immediately, I know you’re in the business for the wrong reasons.” Many VCs look for startup founders who are experienced and committed to their company – who know the market, have experience in the industry, and will stand by the company for the long run.
- Miss a subtle “no”…or jump too early on a “yes.” VCs don’t want to be known as the investors who missed out on the next huge disruptive company. But sometimes, they’ll subtly say “no” by suggesting a startup is too early, is not a good fit for their portfolio, or has a too-high valuation. Sometimes, the “no” will be because the VC firm has closed its most recent investment round or because it wants to see a lead investor sign on first. These are all valid reasons – but they may also be a way of letting you down easy. Receiving this response and then continuing to reach out for advice or ask for follow-up meetings can be annoying for busy VCs or even make you seem desperate. Likewise, accepting the first offer can potentially harm your company. You want to be sure you’re getting the right investment at the right deal, taking into consideration things like valuation, ownership stake, and mentorship.
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