7 Tips for entrepreneurs when interacting with VC investors:
1. When seeking out a VC investor, do not necessarily contact a partner immediately. Partners can be way too busy with portfolio companies, speaking and/or travel engagements. Plus to convince a partner requires both skill and brute force as the threshold is much higher. What you should do is contact either an associate or a Vice President, carefully nurture the relationship and then move up the food chain. The reason you ask? Simply put, associates and Vps need to find the next big thing and will be much more receptive to your pitch at the start.
2. Make sure that in the middle of your fund raising process you end up meeting with one of more partner. Staying at the associate or VP level means stagnation.
3. Understand investor expectations. These are neatly associated with the stage your company is in. Stage expectations can be loosely defined as follows: a) seed round: focus on proof of concept, prototype, proof of market, b) A round: focus on building and proving the team as well as testing the revenue model, c) B round: start growing the revenue model through iterations until you get the right mix, C round and beyond: growth baby growth! As such make sure that your pitch, your narrative and immediate milestones is rightly focused based on the round you are in.
4. Act your round and maybe a tad beyond. If you have raised an A round, then act as an A round company and start stretching towards B so that investors feel comfortable knowing you know where you are and what you are doing. Raising a B round and acting like a seed is not a good recipe for success. Be aware and act accordingly.
5. Focus on sales and marketing at every stage of your company’s development. No, wait, I am wrong, do not focus, obsess about sales and marketing. I cannot stress this point enough. Most companies and founders have a solid handle on the market, the opportunity, the value proposition, the technology, the product and its positioning, the feature/functionality set. Yet an overwhelming majority of startups know little about the cost of acquisition, churn, life time value of a customer, sales cycle, implementation issues, lead times, who to sell to, partnerships, b2c or b2b sales techniques and requirements, budgets, campaigns, guerrilla marketing, public relations, tactical marketing… The more you will know about all of the above the more you will stand out compared to the competition. Invest the time, you will not be disappointed, trust me.
6. Focus also on your culture, your team, how you recruit and grow a team, how you gauge and analyze the people you want to bring in, where you will recruit, when. Show, showcase, explain how the team is complementary, works together, how you will upgrade and build. Not many startups focus on this early on. Again, you will stand out if you flesh this part of your business.
7. Warning… we get bored easily, we have a short attention span. Hence, you need to make us dream, you need to draw us in. Sure, we react positively to a big opportunity, a good time, a great timing and good economics. That is not enough though. I personally become much more aware of the pitch and who is giving the pitch pre investment and become much more engaged post investment when three dimensions are folded into the narrative a founder weaves when interacting with me. These three dimensions are Ethos, Pathos and Logos. Ethos means you need to convince your investor audience about your credibility and character both in absolute terms and relative to the business proposition you champion. Pathos means you need to appeal to our emotional side, to trigger sympathy and empathy, not via hollow tricks mind you, but genuinely as a real human being. Logos, well this is the easiest aspect usually, means you need to appeal to our logic, our reason via well thought arguments, forecasts and propositions.