I recently had a call with a tech startup that complained about wasting too much time during initial calls with potential VCs because they have so much to tell. Their excitement about the product is killing them!
I should stress that we’re talking about a one hour conversation, which is a sufficient amount of time for any startup to spark the interest of a potential investor, as well as business partners or early customers. We all know there is a significant difference between raising capital from seed investors or series A investors but in either case the initial call or talk after an introduction is key.
Investors are always looking for warning signs, for reasons not to invest, so you have to show off your strengths in an honest way right from the beginning. Investors are going to assess the founders’ abilities to present and attract attention, which is a necessary skill for selling the actual product or service. Leadership skills are also important, while investors will also assess the founders’ abilities to learn and process new information. Finally, the team’s motivation, ambition and track record can play an important role in shaping the investor’s initial reaction, as they strive to find an A-team that has the ability to outperform the market and create a successful outlier.
So, what’s the best way to approach such calls and conversations?
Switch perspective and look at it from the investor’s point of view. Investors are busy people, as you no doubt are yourself, so it’s essential to make the best use of the time you have available. After doing your research on the investor to ensure their investment focus represents a potential fit, ask yourself what information the investor might need from you. What do you need to convey in order to help them decide to take the conversation to the next stage, and how can you best sell your business at every stage?
Here’s a framework to help you better structure the content of your initial conversations:
Why did you start your business? Tell the investors about the pain that you felt yourself or recognised in your potential customers.
What’s your personal and your team’s motivation? Let the investors know where the excitement and passion comes from, what keeps your team awake at night.
Who are the key performers behind your venture? Give investors an introduction to your team’s key members and how you got together, the company culture and why you’re the guys to make it happen.
What is your solution, the new thing the world needs? Don’t read out your plain product description! Show in a tangible / visual way how your solution works (make it imaginable), the impact it has on your customer’s life, and why it makes them happy.
Time to shine?! Share your vision, sell the dream, the market potential and upside of your company. Investors are all about decreasing risks, so don’t point them towards them, but show the positive sides of any challenges you’re facing.
What stage is your company at? Explain where you are right now: your team, your product, the business and the market.
What is your ‘ask’, why are you speaking with this investor? Tell the VC what you need, where you think he or she can add value, and what you’re looking for. Be tough and also ask questions about them.
Keep it simple, stupid…and keep it short! Don’t elaborate too much on each point, if the investor finds anything interesting or requires more information he or she will ask for it anyway. Be prepared for the fact that this will be a dialogue not a monologue, but be ready and willing to lead the conversation as that is a sign of strong leadership.
Finally, it’s your goal to figure out if there is a good fit. Making things up doesn’t work, it kills the relationship even before it gets started. Be open and be honest.