Your first VC meeting
It’s a challenge. Being in the dark about what’s best practice when getting prepared for meeting with your potential venture capital firm (VC). So, where do you begin.
Once you’ve successfully got to an arranged meeting, how do you make sure that you stand out? How do you demonstrate, in an immature market, that you’re credible and your commercials stack up or that your market even exists?
A VC is a form of private equity investment that provides capital to start-ups and early-stage businesses with high growth potential in exchange for an equity stake. With that in mind, you’re looking to exhibit that you’re the right person to take your product and business forward in order to get their buy-in.
With every step of the way with your target VC, the primary goal is to get to the next phase. Many entrepreneurs are over-eager, hoping to get funding as soon as possible. As a result, they try to provide far too much data and information in one initial meeting. The primary function of the first meeting with a VC is to decide whether there’s going to be a follow-on meeting, so keep it brief. The VC is going to need enough basic information to decide whether to commit resources to take next steps.
flinder CFO Dave Eaton says,
“The goal is to establish that your market is viable. That's the first hurdle.
And, it has become more challenging now given the VC market is less buoyant. When you get to your first meeting and you’re going through your presentation, there are two key items that you need to convince your potential investors of:
- that your TAM (total addressable market) is big enough to provide the returns they need to see, and
- that you’re the right person/management to exploit that TAM.
With your pitch deck and your overall presentation, the shorter the better. It probably won’t answer everyone’s questions but just keep it real and not overly complicated. Don’t go into the minutiae of the detail. You should be trying to focus on those two key points.”
What’s likely to happen in a meeting with a VC?
Once a VC has concluded that your value proposition is interesting enough prior to your first meeting, attention will turn to a deeper exploration of your plan as well as looking at the team in place to deliver it.
Know that if your VC has experience in your market, they will have seen other pitch decks with similar approaches so will be looking for differentiation. Your team may be the most important differentiator as they will be the ones implementing the proposed journey of the business. The credibility you establish in the first meeting with your team may be your best asset.
Be prepared and rehearse. Know your pitch deck well and have answers ready for expected questions. If there's more than one of you attending the meeting, you should agree in advance who is owning which sections to make it seamless and demonstrate you’re both prepared and complement each other.
Speaking from the customer’s point of view in some instances may help the VC know that you have looked at your product and proposition from your key customer/persona’s desires and pain points. Equally, there is a fine line between presenting with passion and over-the-top enthusiasm, stick to the former. You need to illustrate that this is a business that you passionately believe in and have committed to. The VC should come away feeling that you will do what’s necessary to make the business a success.
What kind of follow up should I expect?
Dave offered this advice as well, “Stay front and centre of the VC’s minds. VC funds have quite specific criteria, so if your stars don’t align initially, I wouldn’t write anything off, things can be a better fit at another time. Fund managers follow the progress of those they take an interest in, so stay in touch. A ‘no’ isn’t always a ‘no’, it’s a ‘no for now’ in many cases.
Also, the landscape is complicated as an early-stage business. Seeking a VC is a hugely time-consuming process. Your instinct will be to cast your net as wide as possible. If you do, you will end of wasting time on VCs that you don’t fit into your criteria or your marketplace. Look for VCs that specialise in your world so do your homework.”
