Q: Dear SaaStr: What are Some Rookie Mistakes Founders Make During VC Meetings?
I have done one investment where it was a non-CEO founder that reached out, and it worked out well (Pipedrive, $16m entry -> $1.5B exit)
But still — don't do it Only worked once.
The CEO just has to do it.
— Jason ✨Be Kind✨ Lemkin (@jasonlk) July 11, 2023
We did a version of this answer / post pre-Covid, and most of it still held in the new world of post-Covid VC investing. But not all. The velocity, the pace, and the strategy has changed. And it matters so much less where you are based.
But still, founders make the same mistakes again and again.
Here are a few that are easy to fix:
- The CEO not doing the outreach. You’ll see so many VCs talk about this on twitter, for a reason. VCs want to hear from the CEO, period. The odds an email gets a response from a non-CEO are 10% of that if the CEO reaches out, best case.
- Being cagey with answers. Just answer the question. How much are you raising? Where are you in the process? Being direct (and honest) builds trust. With VCs, you want to build trust quickly, if you can.
- Bringing the wrong people with you. Do not bring “consultants”. Do not bring anyone with you that isn’t part of the senior team. Period. As soon as you bring a “consultant” with you — I’m out. 100% of the time.
- Not sending the deck ahead of time. Just send it. You are wasting both a lot of time, and an opportunity, by not letting VCs do basically homework ahead of time. Make it easy on them.
- Not doing at least basic homework on the VC firm. You should know their other investments in the space. VCs may be fungible, but no one wants to feel that way.
- Spending more than 2 slides on “the industry”. Do not do this, unless asked. Assume VCs understand what is “happening in the cloud”. This not only is a waste of precious time … I’ll fade away.
- Going in too strong. If you have 2 signed term sheets, for sure, go in strong. It saves everyone time. But being too aggressive, too take-it-or-leave-it, if you don’t have options — is a big mistake. BATNA, folks.
- Going in too weak. Telling me you could succeed “if only you could raise $____” is just the wrong message. Winners always find a way to win. No matter how hard it is.
- Settling artificial deadlines. If the deal really is closing Friday, then, great be aggressive and transparent. But if it isn’t … what do you do when it doesn’t?
- Asking for coffee to “share notes”. Some VCs may want to do this, but I sure don’t. My job is to invest. Show me a product I want to invest in — I’m in. I already drink 4 cups a day. I don’t need a 5th.
- Hearing about how the founders met in elementary school. Even if this is true, I don’t want to hear it, at least not as a part of the core pitch. That’s not a positive for me. I want to hear why the founders are amazing.
- Not answering the questions. If I ask a question, there’s a good reason. Some VCs like to hear themselves talk. I don’t. Just answer it. If you don’t know the answer, tell me. Don’t tell me “you’ll get to that later”. Because if you do, that may well be too late.
- Not speaking with data. Always speak with data, if data is there. Even if it isn’t great. I don’t want some qualitative answer, once you have even just 10 customers.
- Claiming pilots, unpaid users, and anything similar are “customers”. They aren’t. And don’t claim they are MRR/ARR. They aren’t. Be clear what is a pilot, what is paid, and what isn’t. Otherwise, this blows up on you in diligence.
- Hiding anything. It will come back to bite you. Some things may be more appropriate for a second meeting, but make sure whatever top level issues there are, come up in the beginning.
- Poor understanding of competitive landscape. You have to get this right. You have to. First, always have a competition slide. Second, know it cold. Third, be respectful of any competitor larger than you. If you don’t understand the competitive landscape cold, you don’t really understand the market — or what you are going after.
- Not having the >first< slide sell the company, and really, even the first email. If the first slide is the only slide you need. If it sells the whole deal. Your odds go up. Elevator pitches are important. So is a “1-slide” pitch. Make that first slide count, folks. Metrics, team, product, financial goals. Put it all on Slide 1. Position the company, and answer all my questions right then and there.
> Your job is to pass the 20 minute test. <<
To get a VC to want to invest no later than 20 minutes into the first meeting. Anything you do that handicaps a VC getting to a decision in less than 20 minutes dramatically harms your odds of getting funded.
And for some examples of what top VCs look for in cold outbound in particular, catch up here: