“How many crappy startups are there?” I asked Dave and Alain, two partners at the VC fund where I was an EIR (Entrepreneur in Residence). We had just sat through another pitch from a hopelessly lost CEO.
“Too many,” Dave said and we all laughed. Then Dave continued, “And remember, these are the companies we meet with face to face. There are another two companies we don’t meet with for every company we do meet with.”
I just shook my head.
Yes, it should be hard for you to get funded.
It’s like what, Barry, the Chairman of the Board of my company said to me one day, “This is the NFL.” What Barry meant is that when you raise money from VCs, you are in the big leagues.
This isn’t high school football, only the best of the best get to the pros. And it’s the same for raising money. Only the best of the best startups will get funded.
So the better question you should be asking yourself is what do you need to do to give yourself the best chance of getting funded?
The Venture Capital model isn’t broken. The bar is appropriately set very, very high.
Now that were entering a recession driven by COVID-19, the bar has gotten even higher. So instead of wasting energy on what’s wrong with Venture Capital, you should focus on improving yourself and your company.
Let’s assume you have a company that’s in a segment that VCs are active in. The maybe you should look at…
A. How well you are executing.
If you’re not executing well, and your company isn’t growing fast enough, then why do you think you’ve earned the right to get funding? The answer is you haven’t.
It’s like, Erwin, one of my potential Series B investors said to me, “You’ve done everything you said you would do.” Erwin had passed on us during our Series A fundraising (remember, there’s always another round), but we’d executed our plan, and that wasn’t lost on him.
It will not be lost on your potential investors either if you execute your plan. Then…
B. You should always be prepared every time you meet with a potential investor.
Dave, the partner at the VC fund I was an EIR at, said to me, “You never know what’s going to happen when you open the door.” In other words, Dave was saying you don’t know how good any entrepreneur is going to be when you meet with them.
Think about how refreshing it will be for a VC to meet with you if you have a great company that is executing your plan and you’re prepared for the meeting. You’ll be the exception, not the rule.
So rehearse a little bit. No, scratch that. Rehearse like crazy, and really come prepared for your meetings. Research the partner you’re going to meet with, and…
C. Make sure you make a positive impression fast.
VCs are not the most patient of people. If investors don’t get the feeling quickly that your company is worth investing in, then the odds of a successful meeting go way down.
So make sure you explain immediately why your company is significantly better than any competitor. Make sure you explain immediately what your company does. And make sure you explain immediately how big the opportunity you are chasing is.
You don’t have time to gradually build your story. You have to get there in maybe seven seconds or less. Oh, make sure…
D. You only bring team members that are going to add value.
I’ve sat through pitches where it takes over 20 minutes to get through introducing your team. Talk about a rally killer. You’ve lost before you started when you do that.
Remember, your goal is raising money, not appeasing the egos of your cofounders and executives. That means you might need to leave a few people back at the office. Finally…
E. Have your backup slide deck at the ready.
Do you really want to separate yourself from the pack? Then have a backup slide deck ready that has the answers to frequently asked questions that don’t fit your pitch deck.
That’s how you keep the momentum going, and that’s how you become that one company in one hundred that gets funded.
For more, read: How Do You Extend Your Runway Before Raising Money?