VC Panel Interview – Building relationships with VCs 🤝
A few weeks ago Ashley Reeve and I attended an insightful event hosted by MeetFounders where we had the opportunity to hear from Venture Capitalists about how founders can best to build relationships with investors, and heard pitches from five start-ups who are looking to secure funding. We heard some great pitches from the founders of Ecopad, EMenu Now, Legislate, Rock-On.Space and Electric Miles.
The evening consisted of VCs sharing their insights into networking and building relationships with VCs, validating your product, knowing your market (and risks!) and finally, how best to approach a VC partner in the first instance. We heard some excellent advice from the below VCs who formed the two panels on the evening:
Insights shared by the VCs on the night are as follows:
Networking & Building Relationships with VCs 🤝
Advice to founders for the first call with the investors:
- Show you have done your research! The VCs are investing into the founding team as much as the project in the early stages. Their advice is to speak with founders who gave raised before, who can share insights and experiences prior to your initial call with the VCs.
- Structure your call. This should include an introduction, background of you and your business, the problem which your business/product solves, your go-to-market strategy, how much you are raising and any experience you have doing this previously. Don’t assume the investors know anything, explain simply and concisely.
- Try not to have too many people on the call. Two people pitching is enough and having more will make it difficult for you to give everyone a voice in the meeting.
- Tell the investors what you plan on doing with the money. This should be specifics, not ‘hiring’ or ‘marketing’, you should be able to demonstrate how the investment will positively impact the business.
- Be prepared for your business to be challenged. A founder’s ability to react well to a probing question is a very positive sign as to how you will react to challenges in the future and how you will receive/adapt to important feedback.
- Do not be disheartened if you are not successful in securing investment from the call. Some investors will see 50 decks a week, this isn’t necessarily a reflection of you or your business, there may be either more suitable investors or a better time for the investor to be part of your journey in the future.
Green flags for investors ✅
- A good product and founder fit is great. A founder who truly believes in their product and have a genuine experience of the problem is very helpful, especially if the problem is relatable!
- Investors love a good team dynamic. You can see cohesion in teams and if they work well together.
- You should be able to precisely field questions about your business and challenges in your sector.
- An up-to-date LinkedIn is very helpful, post regularly if you have news and update. Keep your employee numbers up to date, they will check your LinkedIn before they decide if they want to have a call.
- Copywrite! When all potential investors can see about your business is what has been written, a page full of spelling errors could suggest poor attention to detail.
Knowing your market opportunity 📈
- Ensure you know what your consumer behaviours are, keep in mind current trends and those that are likely to change.
- Be aware of the exit opportunity for investors. Investors may look at 10x revenue by the time they exit. You should know your market spend, what does the exit opportunity look like for investors? If you are making £10 million, investors may look forward to an exit at £100 million. If the market cap is £200 million, it’s not as an enticing opportunity as it may seem.
- Demonstrate your knowledge of your market and your product. Revenue targets may be an estimate, but all forecasts should be well-educated. If the numbers are based on sector growth, for example, outline why this sector will grow.
- In emerging industries/areas (blockchain, web3, etc.), there may not be data to use, however you should use research to see how many people will pay for the problem to be solved. You may need to educate investors on why it is a problem, particularly if it’s not one that they have ever been able to relate to.
Validating your business to investors ✍
- Having a true, authentic brand identity will help with customer acquisition and retention. In your market, how long do customers stay for?
- What makes your product different to your competitors? What can your product offer that a current market product cannot?
- Demonstrate evidence of demand in as much detail as possible. Do you have a waitlist, returning customers, customer feedback, sentiment analysis, etc?
- Ensure that your product solves the problem you think, and not another problem that you’re unaware of. For example, can you ask your existing customers/beta users if the product solves the problem you think it does?
- Do you have multiple avenues of growth (growth marketing, acquisition, k-factor, etc.)? If so, what is the spend for each avenue, and is the rollout of this reasonable?
- Validate your market in one domain at a time. If your offering is too broad but no avenues have been validated, you may have a costly rollout for products and features that do not have the demand in the market.
Demonstrate awareness of the risks to your business 🚫
- Be adaptable and capable of pivoting to mitigate risks. The market may change and as a founder, you will need to consistently assess and predict future risks to your market. If there is a potential barrier your growth, does the funding amount you are seeking help with this?
- Know your customer, do their needs change with the market? Products that demonstrate longevity through different periods (i.e. a recession) will fill investors with confidence in uncertain markets.
How best to reach out to investors 📧
Though each speaker suggested different means of contacting them, such as the company website, the general consensus was the most effective approach was a tailored introduction on LinkedIn. This is where you can demonstrate you have done your research as to why they specifically will be a good partner for your business.
If you can see that they specialise in investments for Web3 businesses, for example, referencing your business is in this space will increase your chances of gauging interest in your product.
Remember, first impressions count!
If you’re a candidate interested in securing your next role in a scale-up business, a founder who is looking to build out your leadership team pre or post-funding, or if you want to hear more about the recruitment and investment in early 2023, book a call with me here 💻