Why I hate the phrase “it’s too early” (and what you could say instead)

I have recently been mentoring two companies as part of the (excellent) Green Light Programme from Capital Enterprise. These companies are hoping to raise money from angel investors and VC funds. In both cases, the companies have a product, they have made sales, they have a brand, they have a team and they have raised a ‘pre-seed’ round.

The companies are both now looking to raise a bigger seed round (~£500k) and I’ve been helping them with this. As part of this, I’ve been introducing them to various funds. To my frustration, I’ve had the same response of: “this start up is too early [stage]”, from 8/10 of these VCs. In each case, this response came after the fund had seen the pitch deck and subsequently asked to meet the team. Except in one case, none of these responses were qualified with what milestones the business would need to reach for it to be investable.

I’ve seen how difficult this has been for the founders, particularly as they have been talking to what appear (from their websites) to be very early stage funds or angel groups.

However, these responses reminded me of how often I’ve said the same phrase to founders myself, often as a easier way of saying ‘no’ without having to really engage in why not.

Before going further, it’s important to note that there are a few very good reasons why VC’s end up meeting businesses even if they expect they might be ‘too early’.

1. VC’s want to see companies early, so they can develop a point of view on their speed of progress and give useful feedback on their direction of travel before they are ready for funding (as Mark Suster said — ‘VC’s invest in lines not dots’).
2. VC is not ‘investing by numbers’ and rules can flex. So VC’s prefer to meet companies just in case they are so phenomenal, that the rules go out the window.
3. It is genuinely hard to clearly define what ‘too early’ is; some businesses (in healthcare particularly) raise hundreds of millions and get to IPO before they have launched a product. On the other hand, some businesses have built products, a team, revenue and still haven’t necessarily proven that they are venture return businesses until they show certain growth trajectories, or a business model that can scale.

Some companies have raised billions of dollars before launching their products, like the virtual reality company, Magic Leap, which, according to Craft.co, has raised $2.3bn and is still pre-launch.

However — I think that too often, VCs (myself included), say something is ‘too early’ without really thinking it through, and this wastes time and creates more friction for founders in an already difficult fundraising process.

What to say instead of “it’s too early”

I’d like to recommend two things to VCs which I think would significantly reduce time and difficulty for founders fundraising for early-stage companies.*

1. Define ‘too early’’ for yourselves. If you haven’t already, have a regular discussion amongst the investment team at your fund about what ‘too early’ really means for your fund for different kinds of businesses & business models, so everyone is clear and on message when they interact with companies. There are often contradictions in the VC’s portfolio companies — when they have made exceptions and invested at pre-seed for example, or done an opportunistic Series C round, which mean that this is not a straightforward thing for VCs or other founders to interpret.
2. Be open about it. Once you’ve defined your own ‘too early’ criteria, state this on your fund’s website. For example: If you don’t have a founding team, an MVP, some trial customers and some revenue, you are likely to be too early stage for us. You could also add ‘we are still interested in having a meeting to get to know you’, but set the founder’s expectations that this will be unlikely to lead to investment, so they can manage their time and process.
3. Consider whether the real answer is a straight ‘no’. Before telling a company that they are ‘too early’, think about whether the business is genuinely ever going to be investable for your fund. If it is not, it is far more instructive and constructive to give the reason why it isn’t, so the founder can take that away and learn from it, rather than waste both of your time and theirs. The second best answer is a quick no.
4. Help the companies set future goals. If you think the company is interesting, but it genuinely doesn’t meet your stage criteria, give the founder the information of what you would need to see for it to be ‘right’ eg. ‘It’s currently too early stage, but please come back and see me when you’ve achieved X (milestone, proof point, revenue number) etc’. Even better — ‘we estimate from your projections that this might take 6 months — shall we book in a meeting then’?

If more funds followed these steps, we could banish the (unqualified) phrase ‘it’s too early’ altogether, which I think would be a win for everyone concerned.

I’d love to hear if there are any great examples of VC’s who’ve nailed their messaging about which businesses match their stage, and if you agree or disagree with my perspective.

If you are a founder with global ambitions and you’re raising money for your business, please get in touch on Twitter or LinkedIn.

*This is written from a seed investors perspective so it may not be relevant for all funds.

**Ideally add a ‘submit a pitch’ section to your website too, since many people struggle to get a ‘warm introduction’ through networks.