Never lie or be afraid. How to communicate with an investor

Sergey Toporov
Feb 6 · 6 min read

Note: This article was originally written by me in Russian for “Secretmag.ru” (link below), but since the topic is quite important, I decided to translate and share it here.

On a daily basis, I reply to letters and calls from startups — from “cold” emailing to insightfully created pitches. Most of such entrepreneurs seem to have read a lot of insights from venture capital investors on how to prepare a beautiful and clear presentation, how to answer questions, etc., which are very useful. But it is much more important to understand how to build the right long-term relationship with the investor at different stages of interaction.


First of all, acquaintance with investors shall begin well before you actually need money. Try to get on our radar or at least understand our investment focus in advance, tell us about your company (this can be done without a personal meeting) — in writing, by phone/Skype/Zoom you name it.

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It is important to remember that VCs themselves constantly monitor the market trying to find great investment opportunities, and they are not interested in instant indicators, but in the dynamics of a startup, continued success story and, of course, the holy grail is an impressive “traction”, which can be obtained only with time. Therefore, the sooner you begin to communicate with a potential investor, the better.

Investors who rejected your opportunity should not be treated as enemies. Even if the VC passed on your company, they can often offer you some other help. For example, to share the right contacts or recommend you to other VCs who are better fit for your business or invest in companies at exactly your stage. Employees of successful venture capital firms oftentimes have rich experience and extensive connections to give you. They will hardly refuse you with useful and professional advice.

By the way, the investors’ rejection does not mean that they “bury” your business, and don’t see any potential for it. It couldn’t work out in the first instance for many reasons: for example, the terms of the deal may not allow the investor to make a target return or you just didn’t like each other personally at this stage of negotiations. In any case, the “VC’s NO” does not mean that it will be “no” forever: in six months or a year, when your business will grow and the situation will change, you can come back to the same firm again, show your accomplishments and eventually get the coveted “agreed”.

It’s a bad idea to start fundraising when you are running out of money and getting an investment becomes a matter of survival. It’s much better to trigger this process at least six months prior to the actual needs.

I’ll tell you a “secret”: VC investors apparently care about founders stay motivated, but they also bother about their own earnings. Therefore, keep in mind: the weaker financial situation of the company at the moment is, the stronger negotiation position of the investor because you gave them such powerful leverage.

As a startup founder, you need a strong position in negotiations. Think it over carefully — the sooner you start, the more benefits you will get from the deal.

Moreover, at the beginning of the negotiation process, you can play an interesting card: if your company can be of some use to a potential investor, offer it to them. For example, if you have developed a cool advertising technology, and there are companies in the fund’s portfolio that can help with promotion, you should definitely discuss this opportunity with them! So don’t forget to throw hooks from the very beginning.


The most important thing is to be as transparent as possible. In my experience, people love to talk big about their success stories. However, they are always embarrassed to communicate their lack of massive progress or some difficulties they face. You should never act like this. In many cases, problems are discovered only when they become too serious and it takes significantly more effort to resolve the situation.

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Retreat from the desire to gratify investors, hoping that they will respond more quickly to your wishes and allocate new funds. VCs are not stupid people. They know how to plan. They are experienced and clearly understand which companies they should maintain business relations with and which ones not. And they never hide it. So you should be as honest and open as possible. It is much better if the investor tells you: “We understand that your business is having a difficult period, but you are doing what we believe in, so we continue to support you” than convicts you of cheating and refuses further cooperation.

The next — no less important — recommendation: immediately set up a proper reporting system. For example, for our portfolio companies, we consider it highly professional (and we encourage you to do this) to send monthly or at least quarterly notes to investors in which they tell what is happening in their business, provide key metrics, including financial and product information, outline positive and negative events, as well as formulate requests to investors and their network.

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The point here is neither about bureaucracy, nor the desire to load a partner with unnecessary paperwork. If a portfolio company provides more information about themselves, if they communicate with VC in the very same deep information field, then the investor can be more useful for the startup.

But the business at an early stage has many other problems besides reporting, so we don’t push too much on it and do not put obligatory requirements. And yet, my experience shows that the preparation of such reports, even in an arbitrary form, helps entrepreneurs themselves to better understand the current situation and better manage the business. An investor here will act as a mentor and assistant.

This is important, because (no matter how strange it sounds), not every entrepreneur knows, for example, how cashflow differs from P&L. But such financial knowledge is extremely important to the founder because they allow you to operate with accurate data, evaluate your business systemically and correctly set tasks.

Finally, don’t be afraid if the investor’s representative joins the board of directors. In practice, such a person will become not only and not so much an assistant to you, but also act as a kind of “mental support service”. The founders and top management are people with serious ambitions and leadership qualities and should not show their doubts and feelings to the team. But each person wants to consult with someone before making an important (even “internal”) decision, in which they are not completely sure. So it’s just worth testing your idea with your investors because they look at your business a little “from the side” and their experience may be extremely useful.

To sum up, everything is very simple: Be transparent, take everything from the investor and communicate a lot.


Leta Capital

Data-driven Venture Capital firm.

Thanks to Alexander Zemlyak

Sergey Toporov

Written by

Partner @ Leta Capital

Leta Capital

Data-driven Venture Capital firm. We invest in software-related B2B and B2C startups globally at Seed, Series A and early growth stages.

Sergey Toporov

Written by

Partner @ Leta Capital

Leta Capital

Data-driven Venture Capital firm. We invest in software-related B2B and B2C startups globally at Seed, Series A and early growth stages.

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