Between SaaStr and Acceleprise, I talk to a lot of early stage SaaS founders and notice similar mistakes founders make when pitching to VC’s. Every interaction with an investor matters and can help shape the dynamic of the process. Nail each interaction early in the process and an investor will start to lean in, making them much more likely to find reasons to do the deal instead of finding reasons not to do the deal. Below are four common mistakes I’ve seen:
- Lack of transparency and knowledge of key metrics. Some founders aren’t willing to share their metrics up front or even worse, don’t know them off the top of their head in the first meeting. Both are a red flag for me. These are two separate issues, so I’ll address each. I understand wanting to have control over who sees your metrics and when; but if you aren’t willing to share them up front, I assume they aren’t good and/or something needs explaining. In my opinion, it shows a lack of trust and the founder-VC relationship has to be built on trust. On the second point, if you don’t know high level metrics like # of customers, MRR, churn and ACV in our first meeting; I get concerned that you aren’t paying close enough attention to customers, or the business for that matter. This sounds basic but it’s surprising how often founders have to look into it and get back to me. Know your metrics and share them early!
- Don’t be slow to respond. This is admittedly hypocritical given how many times I hear of VC’s going dark on founders; but if I’m introduced to a company or in the process of looking at a company and the founder is being slow (taking days) to respond to basic questions or to schedule a meeting, I often find myself extrapolating that out to assuming they are slow to respond to customers. I know founders are busy building their business but if you are fundraising, then treat it like a sales process and treat investors like your customers. It goes a long way in proving you execute with urgency and that the investor you got introduced to is a priority for you.
- Not being clear on revenue type. If it’s pilot, POC, professional services or transactional revenue, don’t include it in your ARR numbers. I surprisingly see this a lot and mentally it creates disappointment later in the process when I find out it’s not actually ARR. It’s hard to recover from that. I would much rather know the full story ahead of time vs. be disappointed during the process.
- Overstating where you are in the process with other funds. Often founders tell me they are deep in diligence and expecting term sheets within a certain time frame. Sometimes that’s real but too many times it turned out not to be the case and was just a tactic to drive urgency. Build trust from the beginning by being genuine and transparent during the fundraising process.
Making these common mistakes can add friction to the process. Fundraising is hard enough, don’t make it harder!
Thanks to Joe Floyd, a Partner at Emergence Capital, for his input on this post.