10 Things That Tell a VC You May Not Be Ready for “Prime Time”

Being an amateur is OK, even endearing — if it’s authentic.

But here are some things that founders do that perhaps suggest you aren’t yet ready to raise venture capital.  The good news is, it’s really easy to course-correct and just not do these things:

  • You bring “weird” people to the pitch meetings. Do not bring “advisors” or anyone that isn’t a key employee to a VC meeting. Especially not “advisors”.  VCs want to interact with the founders, not hangers on you’re paying to help you fundraise.  CEO or CEO + co-founder only for initial meetings.
  • You change / make up a new valuation based on how much the VC wants to invest. This is subtle, but don’t do this. Don’t change the price, at least not explicitly, based on a VC saying they’d invest $Xm or $Xk. “Oh if you want to invest $2m, then the price is $20m. For $3m then it’s $30m.” Don’t do that.  It may seem logical to you, but take this too far and many VCs won’t think the investment fits their business model.  Just say how much you want to raise — if you know.  A range is OK.  If you don’t know how much to raise, that’s OK too, at least initially.
  • You ask for money to help you build a “sales process”. Generally, this is a bad sign, even though it may not seem like it.  Because you ask for money to help you sell faster and better. Not to figure out how to sell. You need to do that yourself.  Raising money just to learn how to get your first customers generally says the money is all going to go right down the drain.
  • You don’t know your core metrics fluently. You just gotta know your MRR (revenue), average deal size, latest customers you closed, burn rate, etc. If you the CEO has to turn to her/his co-founder for an answer, you’ve already lost.  The best CEOs know their metrics cold, really all of them.  If you don’t, it’s a quick flag you aren’t great — at least not yet.
  • You don’t know the competitive landscape. It’s OK to say “I should know more about [competitor], but I’m not sure of the answer”. Not great but OK. But don’t look clueless.  Don’t say you have no competition, either, as a rule unless it’s really 100% true.  Everyone has competition.  At least, pen and paper.  Or at the very least, for budget.  Budgets are not elastic and not infinite.
  • You badmouth the competition too much. A tiny bit isn’t the end of the world, but great founders respect the competition.  They know how hard it is, and they respect those that have accomplished something in the space.  They tell you how they will win, but often are relatively emotion-free on the relative strengths and weakness of the direct competitors in the space.  Related to this, spend more time making your competition slide thoughtful, honest, and straight-forward.  That’s a subtle sign you can see the future, and understand not just where the market is today, but also at least a few years down the road.
  • You don’t know much about the VC firm. Look it up.  Go to their website.  Don’t be overly fluent, though.  Don’t bring up anecdotes about every company a VC has invested in.  Don’t be a sycophant.  But do show respect. You always want to understand your buyer.
  • You show up late. This is sales. It’s selling stock, yes, but it’s sales.  Great CEOs are almost never late, and if they are, they email well ahead of time.  If it really is traffic on the Bay Bridge — you know at least 20+ minutes out.  Longer if you just check Waze.
  • You’re too nervous. You’re selling yourself and your vision. Yes, the VC firm may have all the money and a fancy office. But be confident enough in yourself.  VCs are not titans.  They may have some of the power in the relationship, but they also are on the hunt for great CEOs.  Be respectful (always) and thoughtful, but no need to be nervous.  We all start out nervous in new presentations and formats (like presenting to VCs), but great CEOs get over their nervousness relatively quickly.  If you have nerves, do a dry run with CEOs or others that have raised capital.  Do several.  Do enough of them until you aren’t nervous anymore, and can easily handle all the tough questions.
  • You’re too arrogant. Don’t be too nervous, but don’t go too far the other way. This can sort of work for later stage investments, but usually doesn’t work well in the earlier stages.  If you have a very hot hand, it can help to be very confident, if not arrogant, for investors.  But if your cocky and don’t have 3+ offers in hand already … that will likely turn off most earlier-stage investors.  We all come from humble beginnings.  Be thoughtful, confident, knowing and purposeful.  But maybe hold off the true bravado until you are growing faster than Slack.
Published on July 4, 2018

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