Guest post by Susan Schoch, COO, Wealth Partners Capital LLC
Entrepreneurship “starts with the hope and vision of what could be.” As an entrepreneur, you are keenly aware that you bear the risk and responsibility for realizing your vision by creating a business that works. You are driven, passionate, have exceptional tolerance for risk and uncertainty. You have the mindset of a champion racehorse with a single-minded focus on the finish line — when vision becomes reality. Only CAPITAL reins you in. HOWEVER… Don’t come out of the starting gate prematurely. Be prepared!
How VC’s See It
1. “Often, entrepreneurs are in a rush to meet in person. We went along with this… and soon saw our schedules descend into gridlock and we ended up generally unhealthy and unhappy and still not actually getting much done…Truth is, meetings are usually inefficient. Let’s start with email. Maybe next we can do a brief call after we’ve tried your stuff and we have something to chat about…”
2. “I love technology products…So I love to play around with your cool new technology. But don’t assume that I’ll come to your website. I’m approached by many people after conferences and they always tell me, “check out my website, my URL is a,b,c.” I really don’t have time to go to every website and play with every product. I tell people to send me your deck.”
3. I talk to a lot of founders, and more often than not they say they were shocked by how hard it was to get a term sheet, how long the process took, and how much more complex the conversations got. As one CEO I spoke to noted, “The way that seed funding is all about your idea and team, Series A is all about the numbers. We weren’t tracking cohorts or anything…I didn’t know about LTV or CAC, or how to answer questions about the economics of scale. We walked into an interrogation that we weren’t prepared for.”
4. “Founders mistake casual conversations with VCs for serious interest. Founders get a bunch of emails or calls from VCs, and then feel like they have to start their fundraising process immediately or miss out. This can (and does) lead to a lot of hasty pitching before companies are ready. And here’s the deal on the VC side: both partners and associates are paid to…build relationships with promising young companies….to make sure they get “the call” from founders when they begin fundraising — so they’re motivated to send “happy vibes”…These happy vibes are heard by a founder’s “happy ears” — often leading the founder to draw false conclusions about the true level of potential VC interest.”
Tips for Crossing the Finish Line
- It’s easier to increase a round than to shrink it, so let investors bid you up.
- Consider raising a larger round for more runway to rack up more proof points before another round.
- Take your time to choose the right investors who will help you raise the next round.
- Know the key inflection points you have to hit to show validation and milestones.
- Give yourself enough time in your market to get the volume of data you for
perspective on the most compelling data points to share with prospective investors.
Susan Schoch Linkedin