What I mean is, make sure you nail the situation you are in exactly. Because all situations aren’t the same. If you confuse them, you may blow an opportunity:
- Go in >strong< when you are strong. If you already have two term sheets, then be direct. “I have 2 term sheets at $X and $Y. I prefer you. Would you match it?” or “I have 2 term sheets at $X and $Y. [Pause]” If you want a beat. Let that pause just hang there. Don’t fill the void with small talk.
- Go in >straight< when you are doing well, but don’t know. Lead with an amount to raise — not a valuation. “We’re at $1m ARR, growing 15% a month, but don’t have it all figured out by any stretch. We’re looking to raise $4m-$5m.” This leaves not only room to negotiate on the table, but more important, flexibility. I know we can work on it together. You tell me how much money you need to get to the next stage. I can try to solve it at a price I can afford. And we can talk about it. This is a low-drama, “same side of the table” approach. Do this if you are warm, if you have something good — but you aren’t hot.
- Go in >direct< when you don’t need any money. You may look at raising at times when you don’t need money. If you’re successful, you’ll have opportunistic chance to raise when you have plenty of money still in the bank. In that case – make sure (i) the VCs know you don’t need money now — and (ii) exactly what the clearing price is to invest “early”. Be clear. Otherwise, they will waste a lot of time and come back and not meet your clearing price. You’ll be tempted to not name a price in these situations. Usually, that’s a mistake. Because a lot of wheels will spin on both sides and not hit your ask. Set out your clear ask instead.
All this means: Go in Honest. You may leave a few nickels on the table, maybe. But your odds of success go way up.