Communicate VC or Die Trying: Why It Is So Important To Get in with an Analyst and To Follow the Fund’s News

Until quite recently it was believed that a startup founder should appear at industry events, make acquaintances and conquer venture capitalists with oratory skills — in general, he should be engaged in networking as much as in a company. Later, the paradigm changed: the founder was considered as a person doing nothing but increasing company’s metrics so that investors would offer the term sheets themselves. The truth is, as always, somewhere in between. It is quite common that a startup founder makes key mistakes in communication with a potential investor, so in this article we will analyze them and in detail describe a roadmap for an entrepreneur looking for investments. From this article, you will learn how to get on our radars or on the radars of almost any fund.

Investor rights. Guide to Term Sheets Part 3

Where to Begin with

First, to work out a step by step plan. Point 0 — determine whether you need venture capital money at all, and whether you can build your project without it. It is worth looking for an investment at least six months before you run out of funds, or even earlier, because the process can take a long time. Once you have figured it out, it’s time to collect data on VC funds and, at the same time, prepare necessary presentations and documents that will help you in communication with an investor.

Do you need a Venture Capital investor at all?

Whom do you want to take this difficult path with? ? What fund will have a portfolio complementary to your project? What investor will be able to bring added value besides money? Or at least will not interfere, bury you with paperwork, reports, turn communication into bureaucracy? All of this is discussed in the present study.

Before fundraising, you should have a financial model, a pitch deck (detailed presentation) and a one-pager (also called a teaser) — a short document that summarizes the basic information about your startup in a condensed form. Ideally, the roles in the team should be distributed in such a way that one of the founders is focused on drafting the deck, and the other one is searching for an investor. You can find useful instructions on how to make pitch decks on the YCombinator page.They also have useful material on presentation design.

HOW TO MAKE VC INVESTOR SAY “YES” TO YOUR STARTUP

Where to Go

Physically — nowhere. Having invested in more than 30 companies, we met only 1 of them at the event. All other investments happened due to personal contacts, warm intros from acquaintances in the industry, and even cold letters to our mailbox or Facebook.

Leta Fund I and Leta Fund II statistics

Use the Startup Community to Help You

If you are in contact with entrepreneurs who have already gone through the process of seeking investments, it is worth contacting them for help. Ask them to spare you 15 minutes, call them and ask questions about their experience as well as for recommendations, write down useful tips.

I am quite often asked to make an intro with Leta Capital. Alexander Chachava, Sergey Toporov and I have known each other for a long time, since launching my previous startup. Sergey followed Buddy almost from the conceptualization stage, and as soon as we managed to meet the criteria of the fund in terms of metrics, we agreed to cooperate really fast. Our partnership has developed, one might say, organically. But we must admit that we talked for about a year and a half before it happened.

Ivan Crewkov, CEO of Buddy.ai

If there are no such acquaintances in your circle, then the open startup communities will help. Here are the most notable Russian-speaking ones.

1. Russian Startup Community
   A Facebook group that connects the local startup community with the global one. Communication is predominantly in English.
2. Startup Networking
   A Telegram chat, created specifically to exchange experiences and discuss topics of concern for entrepreneurs.
3. Product Hunt Community Russia
   Another Telegram chat where you can not only talk about launching a project on Product Hunt, but also to find people who can answer your questions about the investment search process;
4. VC Kitchen chat
   A chat, that brought together Russian-speaking startups and investors from all over the world;
5. Startup Hub
   A Facebook group for tech entrepreneurs and anyone interested in tech entrepreneurship. It has more than 12.5 thousand participants, including founders of startups, employees of corporate innovations departments and venture funds.

“OK Google”

Open sources search is also important. Scouring media, going through Crunchbase, reading professional channels — all this can help to form a list of relevant investors. Use existing lists and create your own on their basis, adding comments, clarifications and updates. By the way, great content to share with the community!

Use Facebook

Here you can both search for contacts and set up targeting. Okay, the first part is pretty clear, but the question is, how fundraising and targeting are connected.

Here is the answer. If you want to get the right investor, you’ll need a hook. Before writing an email, create several catchy creatives leading to your landing page (it doesn’t matter if you are a B2B or B2C startup) — it should be clear what you do, who your client is, what specifies you and distinguishes from the others. Find the office address on the investor’s website, spin the creatives based on location. Publications in the media also work great: collect articles about you and show them to investors. The chances of being noticed increase significantly.

Whom to Write to

There are several rules: if you have a personal “warm” contact among founders who are familiar with investors, then ask him or her for an intro. Another effective move is to contact a fund’s analyst. Few people think about this, but it is he or she who has a big influence on a startup’s destiny. Find a contact and write a letter where you briefly introduce yourself, describe your experience, project, key metrics and ask for a call.

Why making friends?

An analyst is a person who is constantly in touch with partners, if he or she likes your startup, he or she is able to influence how it will be perceived in the team. This person becomes your ambassador, your advocate. A priori, the analyst has more time to study your project, dive deep into it, ask questions that will help to reveal the essence and give some new introductory information. Even if it turns out that the project does not fit the foundation according to some criteria, you will receive valuable comments on your presentation. Perhaps the analyst will even tell you which of the colleagues in the market would be better to contact with.

How can an analyst help a portfolio company?

A partner will never (or almost never) edit your presentation, will not think about how to help you formulate a letter for a new round of investment, will not delve into operational problems. An analyst also may not do, but if you have built a strong relationship with him or her, then believe me, you can always count on a piece of advice and a competent look from the outside.

If you want to better understand the psychology of an analyst, imagine yourself for a second in his or her place — the day consists of reviewing and analyzing plenty of projects, calls and meetings, market analysis, reading industry news, preparing materials for the investment committee, etc. What would hook you in such a cycle of things? Think about how to get the attention of such a person, this exercise can play a key role in the fundraising process.

Hacks, how to draw the analyst’s attention

Want to impress the fund’s team? Here are some tips for you to do this.

1. Record a video presentation of your slides. This will help analysts remember you and evaluate public speaking and information structuring skills.
2. Make a product presentation with the means of a product. For example, if you are doing an AR startup, create a virtual character who, when you point your phone camera at your letter, will start talking about the company. In addition, by sending a link to download your application to the fund analyst, you can know for sure whether he clicked it or not.
3. Put together a personalized presentation. Even if you do not do business in the segments of AR, cloud services or AI, it is possible to talk about the company in a creative way without large resource costs. Use tools like Readymag or Tilda, make animated transitions, add storytelling, and reach out directly to the team member who receives your presentation. They evaluate the content firstly, but this move will make a strong first impression.
4. Send a physical package to the team. For example, you can buy several digital photo frames, upload your presentation and send them by regular mail. Approaching a package outside the box is a good example of how creative packaging can bring attention to your product and explode. It may seem like a strange idea, but anything that sets your communication apart from others is good for your company. Any detail can play a decisive role.

One and Two — check out a couple of presentations that illustrate an idea or product using interactive tools.

Dont’s in Communications with VCs

There are some standard rules — no need to try to work out a FOMO from an investor and sell your project as a product in a store “on the couch” (have time to invest right now, because only today you are given this incredible window of opportunity!), Do not start your presentation with “unique and inimitable” features (numbers are always better than any words about a project).

But here are a couple more tips:

1. Don’t interrupt. The time of a venture investor is really a valuable resource, I am sure that you always want to say more than what you have time to say at a call or a meeting, but in the pursuit of the amount of information you want to convey, do not forget about the quality of communication. The quality of communication is determined by how well? you can adjust to the interlocutor or bring on your own wave. This is a skill worth honing with constant training.
2. Don’t let others speak for you. At meetings with investors, there are often several project founders, and it is normal that one person will answer technical questions, and financial ones, for example, another, but worst of all, if questions about your project are answered by, say, a startup mentor or an external consultant , which thus pulls the blanket over itself and puts you in a bad light.
3. Don’t attend meetings unprepared. It may sound trite, but practice shows that the founders cannot clearly answer many basic questions outside the pitch deck. Learn all the indicators related to your startup, even if you do not put all the metrics on slides, it is important to be able to tell about each of it, its dynamics and forecasts.

A Step by Step Plan

1. You and your team prepare a full set of materials.
2. Looking for funds: their strategy should act as a marker, whether it is worth writing to them or not. You can create 3 columns of investors: the best match, partly matching, not perfectly matching (just try to contact to the third part of the list — it might happen that you like each other so much that investors will consider your company as an investment opportunity or at least help with fundraising through their network).
3. Send letters to analysts or info mailbox. At the first touch, when you send an email, at least attach a text description, one-pager and a deck. The rest is a subject for creativity, but do not forget about the common sense.
4. Make follow-up emails.
5. Maintain a CRM system and record your communication with funds.
6. Go to meetings as prepared as possible.
7. Show your best side during due diligence (this process is not only about providing data, but also about the ability to communicate competently, to truly cooperate).

With this approach the results will not be long in coming.

Summing Up

A checklist is a basic set of steps to keep in mind. Some points at the current stage may be irrelevant to you, some, on the contrary, will take even more time than planned. In any case, the process of searching for investments is a lot of work, you need to allocate a lot of effort and time for it, be ready for delayed results. And of course, we must not forget about the importance of chemistry between founders and investors — even if there is the slightest doubt that you are not the right fit for each other, it is worth thinking ten times whether you need to commit yourself to these obligations or is it better to try to go through the process in a new circle.

Thank you for reading until the end. I hope you enjoyed it and learned something new. Now you have a detailed roadmap and you can reach us via email info@leta.vc or write directly to our analysts:)