Investment process #2: The first contact with an investor
Whether you were introduced to an investor or you reached out cold: the real work for the investment round starts now. The following short overview of what typically happens during the initial due diligence phase at Speedinvest is here to give you an understanding of the first steps in an investment process.
Getting to a call / meeting
You’ll want to provide a quick summary to the investor of what you’re building and where you’re currently standing. Always attach a pitch deck so the investor can get a quick overview instead of having to read a lengthy email. Also keep in mind that investors look at several pitch decks per week, so try to keep it really short. A good rule of thumb is that you want to capture the investor’s attention in under 3 minutes.
YCombinator has provided an amazing pitch deck template for startups in the Seed stage, you can find it here. No need to hire someone expensive to create your pitch deck at this stage — unless it’s your company’s main differentiator. The design doesn’t have to be impeccable, it’s the content that matters. However, make sure the quality is right, meaning:
- If you’re not native English, find someone who is or have a proofreader go over the texts (you can find lots of good ones for little money e.g. on upwork or fiverr). And even if you’re a native speaker, have others check your spelling: it’s simply a matter of professionalism.
- Be consistent and simplistic in your design. If you’re building a digital product, you probably (hopefully) have someone in the team who at least knows something about design. If this is not the case, you could also use a freelancer platform for this.
If, after having skimmed through your pitch deck, the investor decides that there is a potential fit, the second step is hopping on a quick call together.
The first intro conversation
Every call or meeting will be different, even across the different Associates and Partners within a fund. So my suggestion would be to start every conversation with setting expectations, i.e. is there a specific area that the investor wants to focus on or should you give a general introduction of your business. My personal preference is to go through the pitch deck together, allowing for random and more detailed questions throughout the conversation. I always look at pitch decks before I have a first call with founders and I usually give 2–3 areas that I want to focus on (e.g. marketing, team, scalability,…). However, if the investor doesn’t indicate differently, it’s probably safest to assume that she doesn’t know anything about your business (and in fact hasn’t even looked at your pitch deck).
In a great article on what you should send a VC Mark Suster suggests to have a longer and more detailed pitch deck that you can go through together in your call or meeting. The trick about this approach is that (1) by sending out only the shorter teaser deck you don’t have to worry about it getting into the wrong hands and sharing confidential information with the wrong person, and (2) you can go more into more depth during your conversation and show the investor that there is much more that should interest her about your business than what she has initially heard or seen.
I always start every intro calls with a quick overview of Speedinvest, but try to keep this as short as possible. In this first conversation, depending on how contact was established, it’s mostly the part of the founder to sell her business. Similarly, the investor shouldn’t be leading the conversation: I’ve had rather awkward intro calls where I had to ask countless questions only to receive 1–2 liners back as answers. It should be a given that this is not how the conversation is supposed to go. As Mark Suster puts it:
A great meeting is a debate, not a pitch.
An intro call will be scheduled for anything between 30 to 60 minutes. I usually schedule these for the shortest time possible, 30 minutes, mainly because I want to make sure that both the founder and me aren’t wasting any time in case it becomes clear early on that there is no fit. I usually leave some open time after the call where I don’t schedule meetings, so if the conversation is approaching the end and you feel that the conversation could still go on, I would suggest to ask if the investor has more time to spare. If not, decide what the most important things are that you want to get across to the investor before the conversation ends.
At the end, always take a few minutes to understand the investment process on the investor side or at least the next steps — it will allow you to know when to expect first feedback, which documents you should send when and how long a normal investment process takes with the investor. Finally, end the conversation by summarizing the next steps with specific deadlines, e.g. founder sends some more information on the market by Friday and the investor sends first feedback by end of next week. If you’re interested in what you should provide investors with after this first (successful) call, read my next blog post.
At an investors’ dinner a couple of months ago the host called investors “the dark side” of the startup scene. I hope I was able to bring some light to our side with this blog post. We at Speedinvest see ourselves as a partner to our portfolio companies and startups generally. So, if you have questions on the DD process at Speedinvest or you want to start the process with us, reach out to us at firstname.lastname@example.org or upload your pitch deck at www.speedinvest.com.