Dear SaaStr: What was your first meeting with a VC like?
My first meeting with a VC …
It went really well. In fact the very first VC I ever pitched as a founder offered to fund us tentatively with $5m — by the end of the first meeting!
Yes, it was a strong pitch with a strong albeit first-time team. But still, it seemed pretty easy, all things being considered. A $5m term sheet from my first VC pitch ever as a founder!
And … then I blew it.
What happened? Well, first the intro was from an ex-boss, so I had a strong warm referral. I also had a pretty good deck and presentation and team. Market timing was also on our side. We had 2 strong early reference customers. And … we were a pretty good duo pitching, my co-founder and me. Bear in mind, I’d done a lot of VC pitching as a VP at start-ups before. I knew what a good pitch was, and what good metrics were, and what VCs were interested in. I was new as a founder — but not new to fundraising.
We fairly quickly got a draft term sheet for $5m on something like a $10m pre. Not a very good today given the early traction we had, but fair enough for the time.
I went and asked some more seasoned folks what to do. I was advised by an angel investor to push back and ask for a significantly higher price. So … I did. Without even thinking about it. I asked for something like $7m-$8m at a significantly higher price. The details I sort of forget. But I know I asked for materially more.
The VC got offended / pissed / angry / spooked / worried / something. I don’t know what to this day. But he went dark.
I asked him 4 weeks later what happened, and after 3 emails or so, he finally responded. He said I had just pushed him too hard. Without knowing it.
Knowing what I know now, I think I pushed him out of his comfort zone. His fund wasn’t huge, and $5m was likely the “bite size” he was comfortable with. But more than that was just too big of a check. And I didn’t leave any room to discuss it or be flexible. So he walked. Anything more than $5m today is too much for me, too, at SaaStr Fund.
And in the end, there was drama, we ended up having to run on fumes and we had to settle for less for a worse deal from a worse investor. So it wasn’t worth it on any level.
So then I learned to push, for sure — but to listen. Carefully. To learn what each VC is able to do, is comfortable to do. And not to accidentally cross those lines. Especially without knowing it.
