What To Know When
Approaching A VC
A Primer, and a few important tips.
What We Will Cover
1. VC Econ 101 – Know Your Customer
2. Profile of a Hot Deal
3. The Stage/Company Match
4. Getting a Meeting
5. Pitch Essentials & Common Pitfalls
6. The Match Making Process
7. Some General Advice
Part I: VC Econ 101
Raising capital is a sales effort, so you need to know
what motivates your customer to buy.
The Single Deal Axiom
“Your company must exit at a price
that repays your VC’s entire fund.”
Typical VC funds are $200 million in size.
Typical VC stake at exit is 10-20%
Since Profit = Exit * %Ownership…
“Backable Early Stage”
1. A Company with no business traction, but a great team
and really amazing concept.
2. A Company with really amazing business traction and
a team that can execute.
3. A Company with some exciting early traction and a
IMPORTANT: Nobody but friends and family will fund a
business with an unproven team and no traction!
Reach Out Over Email
Send a short thoughtful note
Why they are a great investor for your company
Why they should be excited to meet with you
Attach a slick, scaled down pitch (10-15 slides) with the
Send these emails Tue-Thu.
Partner meetings are on Mondays, and Friday emails get
Never send anything important late on a Friday
Anyone on the buy side in finance has a great barrage of
incoming. Assume that your first note was glanced at on a
smart phone and forgotten.
Use your warm intro connection more than once and as a
Good News – Getting a Meeting is by far the easiest part of
the process. The hurdle rate for a meeting is low.
Bad News – Getting a meeting does not mean an investor is
interested. It just means they are allowing for the possibility
they might one day be interested.
Must Have #1: TAM
Total Available Market = TAM
TAM = ($ from one cust.) x (# possible cust.)
If you are selling accounting software, your TAM is not the
entire software market. It is (the number of firms that
would possibly choose your software) x (their total
population in the world.)
Must Have #4: Concise Pitch
Plan for 30 minutes of presenting time. If you plan to
talk for an hour, there is no way on earth you will finish.
Other Important Tips…
Avoid Slides that look like this one. There are way
too many words on this slide. It is boring as hell, and
the title doesn’t make an affirmative point.
Never discuss valuation. Say how much you are
raising, say if it is a note or equity, but don’t presume
you are in a position to dictate terms.
Pitch to a Partner. It is always best to pitch directly to
a check writer. If you approach an associate and get
turned down, it is very hard to recover.
Your Goal is to get a
2nd meeting. Get them
excited, and don’t bury
them in detail.
Bigger is not better
They can take longer to make decisions
They have more complicated decision making which
makes it less likely they will say yes
They tend to “upgrade the team” earlier.
They always play for upside, and tend to turn down what
the founders would consider attractive acquisition offers.
The partners are often spread thinner, so you might not
get much attention post investment.
Taking biger fund money also has advantages for the
Larger firms are great for deals that require large
amounts of cash rapidly
Large brand name funds attract follow-on capital and
They can afford to pay up for deals they really want
Choose the partner
not the firm
Shared vision of target market evolution.
Right mix of help and patience
Know when to ask the hard questions
Know when to leave you alone
History of success –> has clout with partners.
Talk to other Entrepreneurs
Go to meetups, network, network, network
Information is power and the more you know about the
people you are speaking to the better
Are they knowledgeable about your space?
Have they done a lot of deals already from their current
Who are the decision makers and how do decisions get
made (firm led or partner led)?
With whom do they typically syndicate?
A Serious Commitment
Once you take investment this is no longer your
company no matter how much you own
With great dollars comes great responsibility
Management team career paths
A Serious Commitment
You have committed to do great things
Once you take VC your new found friends have very real
and very big expectations and its your job to meet them
No small ball.
Raising VC is an enabler not a milestone
Many entrepreneurs think that once they raise VC they
have made it!
Your business is probably more risky now than before you
took investment capital
Scott Johnson firstname.lastname@example.org
Jim Schoonmaker email@example.com
Matt Brendzel firstname.lastname@example.org