some things I wish I would have known
Welcome back! So far we’ve mostly talked about product lessons and for early stage founders. This is more on the fundraising side. As always, let me know if there’s anything in particular you’d like covered here.
As a founder, you're always working to build the best possible company. Part of that is wanting to tell the best possible story about the company you're building, especially when pitching and fundraising. Now that I've spent more time talking with VCs from the investor side, I realize how much I underestimated the impact of context.
While at the end of the day, the company you're building is what matters most, taking a few minutes to consider the context you are fundraising in can make a huge difference in creating a less emotionally draining process. By context I refer to the daily, monthly, and long-term experiences of the investors that you're pitching.
Long Term / Annual
One of the biggest misconceptions I've heard from founders is "funds will just do anything, the thesis they have is just for LPs, not founders." Some of the worst advice I've heard is "just get them in the meeting any way you can and then convince them it's awesome." I think this is a pretty easy way to burn out on pitching.
Taking the time to understand the dynamic upfront and pitching the right people vs. pitching everyone can be one of the best ways to save effort and angst.
Unfortunately the easiest way to get it is often after you're in a meeting. Pretty much every investor I know will tell you about the fund at the beginning of the call (space they invest in, size of fund, check size and if they lead/co-lead/participate, how many deals they do per fund, how much time they invest with companies, etc). While sometimes there are small modifications, this strategy is unlikely to fundamentally change.
A fund that mostly invests in Series C is unlikely to get there for a Series A because they're used to having far more data for diligence. A fund that focuses on social networks is unlikely to "get" a developer tool, and vice versa. This also matters within firms. Every partner at a fund may have a slightly different focus. Getting the biggest name on the meeting isn't necessarily the right call if they aren't the person who will understand what you're doing.
Medium Term / Monthly
An investor is going to hear a bunch of pitches every month. And for every company they see, they'll hear about many more through word of mouth.
There are pros and cons to working in a "hot" space.
On the plus side:
Many people working on a problem increases the perceived legitimacy and create the assumption that something will win in the space.
An investor likely has some of the background in their head already and you'll be able to skip some introductory information.
If they've already decided to make a bet in the space and missed out on another company, they might be favorably inclined to dig further into yours (that particular tendency can be why some founders say VCs follow the herd).
On the downside:
The investor will likely come in with an existing set of beliefs about the space. If your story doesn't match, it can be hard to work through the differences.
The more options there are, the more they will need to have strong conviction about you vs. other teams in the space, and the idea that another team could come by next week.
If the space isn’t hot, you’re more likely to get the question “why isn’t anyone doing this?” and it’s also likely diligence will take longer. Knowing who in your space has been fundraising can help demystify which of these scenarios you’ll be walking into.
Space aside, it can also matter how many deals that specific investor has done recently. The investors I know try not to be biased by cadence and focus on the company. That said, if an investor has just finished several deals, they might have less appetite to do one more. Or, if they haven't done one in months, they might feel more excitement about finding the next thing. As much as people try to be objective, it’s hard to imagine there’s no potential impact.
The most extreme version of this is the fund deployment cycle. Founders do often get told to ask about this. For new funds, it's important to ask to figure out if capital is available to fulfill the commitments. It's hard to get money from someone who doesn't have any. This is less relevant with more established funds, and you can usually find an announcement on when the last fund was raised. Some funds are evergreen, and some operator on a two-ish year deployment cycle, although it can range depending on the market.
Short Term / Daily
It's easy to picture a VC as just listening to pitches all day, but VC work is fundamentally unpredictable. The closest analog I can come up with for being a VC is being on call. Some days are completely quiet and you can spend hours thinking about a topic. Sometimes you're scheduled to hear from a lot of interesting new companies. On others, the pager is constantly going off: one company gets an offer to pre-empt their next round, another needs you to talk to a potential executive hire ASAP, and a founder realizes that plan A isn't working at a third.
If it's a busy day, it might make it harder to focus or think through a new idea with a founder. If a lot of things have gone wrong that day, an investor might be more prone to ask "why won't it work?" questions instead of "how can this be huge?" If your business has similarities one that is top of mind on that day they could filter into the conversation.
Unfortunately, for founders, there's not much you can do to prevent this. Everyone (including VCs) wants to show up as their best self, but it doesn't always work out that way. Whatever happens the day of your meeting happens. As a founder I've been too hard on myself in these situations (it can throw me off for the rest of the day!)
It helped me to start to preemptively think through some of the options of what might be going on when a call feels off.
When someone seems impatient, rather than "this person thinks I'm an idiot and wasting their time" it might be "something urgent is happening outside of this call."
If someone is late/reschedules, instead of "they don't care about meeting me" it might be "perhaps something happened with an existing portfolio company, and if I chose to work with this investor, I'd want them to prioritize me over a new deal too."
When someone seems to be only asking questions about what could go wrong, it's entirely possible something is going wrong at another company.
If there’s a pattern, it’s worth digging into. If it’s just one call, it’s probably not about you.
To have the lowest stress fundraising process, I highly recommend thinking about the long, medium, and short term context:
Do the diligence upfront on the funds and partners you want to work with.
Find out what else is going on in the market while you’re planning to fundraise.
Don’t sweat every meeting.