A Guide To Approaching a VC

— Some Hands-On Advice


Dear Founders,

the way you approach a VC tells a lot about whether or not you are a good entrepreneur!

Lots of you guys are building amazing products, developing groundbreaking technology and changing the world. But what many of you still have to learn is putting yourselves into the shoes of an investor.

Working at a VC and screening around 30 companies a day, here’s my advice to you. The rules are simple:

1. Do not send your request to the general email-address.

Nowadays, getting in contact with anyone is amazingly easy. Find out names or direct email addresses, ping us on Twitter. We pride ourselves on being down-to-earth and approachable. Check within your network if you have any kind of connection and try to get an intro. Be professional and don’t just send out a completely unpersonalised email to a mailing list. By the way you approach us, you can demonstrate how you will approach your customers. It’s a test of your entrepreneurial capabilities.

2. Check if your company actually falls into our investment focus.

Every VC has certain guidelines. A regional and thematic focus. Some VCs invest in earlier stages, others later. Check this first (website / call / google) — otherwise you waste your own time and make a bad impression (for later in life).

To see what we (Earlybird) invest in, check this interview with one of our partners, Ciarán O’Leary.

3. Send a pitch or product demo, not a business plan or memorandum.

We have made the observation that the more pages your pitch has, the less likely it is that you’ll get funded. Focus on building your product, not on writing a business plan! Send VCs beta-versions or prototypes. Maybe we will ask for a pitch-deck later. Not more than 10 slides, please! Below, you will find a list of things that VCs will ask for. Pick a few of them that you believe are most important to your particular case and answer the rest in the backup slides or simply send a Q&A list answering in bullet points.

  1. What is the problem of the market and how do you solve this? (Product)
  2. How big is the market?
  3. What scalability and network effects are there?
  4. Who is the team (most important players)? Background? Why are you the right people to solve the problem? Who are your advisors?
  5. Competition-Comparison: What do you do better/different/cheaper/…? (Why will customers not switch to competition?)
  6. How has the company developed since foundation? (Traction — all kinds of metrics possible)
  7. What are the next steps? What’s your Go-to-Market strategy?
  8. How are you financed so far? Cap Table? How much do you want to raise?
  9. Why hasn’t anybody else done this?
  10. Big picture: Winner takes it all market? Multiple? Is this a billion-dollar company or only a tool/feature? What’s the vision? Where will you be in 5 years?

When creating your pitch deck, always remember: Content > Design. Show VCs that you can set priorities! Drawing slides for investors should not be a priority!

4. Don’t hire an advisory company to fundraise for you!

They generally know the startup-world worse than you and do everything wrong that can be done wrong. On top, they cost a ton of money. VCs want to see that you are a good money-manager. We like lean startups! Would you hire McKinsey to do your strategy? No! Then don’t hire an M&A advisor to do your fundraising.

Read more about “Why founders must raise the seed round themselves” by @JohnEHenderson.


Of course, not following these rules does not mean you’re a bad entrepreneur. But take the advice because this will save both you and us lots of time and make it much easier. Contact me in case you have any comments or questions.

All the best,

Simon

Picture Credits: http://publicdomainarchive.com/author/matthobbs/

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