Early stage startups: An Investor candidly shares what they look for during fund raising conversation

Fancy pitches vs. straight-forward talks?
Well, early stage investing is chaotic and Sanjay Swamy of Prime Ventures shares his candid take on what the fund looks for during angel round.

» NextBigWhat’s #Threadmill brings you curated Twitter threads on product, life and growth.

A short thread on what we look for at a seed-stage startup – every VC has their magic formula and ultimately a lot of it is gut instinct. Would love to hear thoughts from founders and others in the VC community.

A lot of my examples are for B2B(2C) – so keep that in mind.

1. Who is the customer?
How narrowly & thoroughly can you describe the customer, what their objectives are & why you believe they have a pain point. The more detailed a description you have of the customer, the happier I am – saying we solve everyone’s problems is a bad idea!
2. What is the pain POINT?
How detailed an understanding do you have about the pain point? Hig big a pain is it to them? What indications do you have that they are unable to solve the problem well today? Why they take any pain-killer that you can provide? How much will they pay?
3. What is your secret sauce to distribution?
As the saying goes, the success of a startup depends on whether the innovative startup will hack distribution before the incumbent hacks innovation? Do you have a way to get to critical mass without having to break the bank on CAC?
4. What is the sharp end of the arrow?
Something that makes customers stand up and say, “I needed this yesterday” is key to early velocity. It’s critical to be able to articulate the WHAT, WHAT & perhaps the HOW in a simple and concise manner to evoke this reaction.
5. Show me – A demo is worth a million words?
I love using ALL products from our portfolio – the best way to get me excited about a product is by showing me a demo and/or signing me up. Sell me the product – while I’m naive/gullible, I love to experience what I’m being pitched.
6. Why will you win?
You are not pitching us to back “A” company in this sector, you’re pitching us to back “YOUR” company. We need to know what your insights are. Saying everyone needs a loan is irrelevant.
7. Don’t read your slides out – we can do that!
We want to know what you know and believe that ISN’T on the slides. And as far as the team goes, your names aren’t as important as your insights, your product plans, your distribution hacks, etc.
8. Read my eyes!
In sales, one needs to read the customer’s eyes to know if the message is coming through. While its harder on a Video Conf, it’s important to do because its a lot easier to lose your audience. If someone has turned off their video, include them in the discussion.
8.2 – for example if I have my video off, use me as an example customer to explain the concept. Ask me questions, force me to be engaged with you along the way. Do not lose your audience and be lost in your love of your voice and your pitch.
PS: I make this mistake too 😉
9. The Goal of ANY meeting is ONLY to get to the next step!
Deals are rarely won in one meeting but often lost in one meeting. Similarly, a VC investment is often required to be a multi-step process. It’s important as much to the founder as it is to the VC…
9.2…A founder/VC relationship lasts over several years & its very important for founders also to know who they are getting into a long-term relationship with. The best investor is someone who has built conviction with you – that should take multiple interactions & some time!
10. Last but not least is the WHY?
Why are you doing what you are doing? If you had your choice, would you be doing exactly this? When this startup is suddenly a Unicorn, will you still have the motivation to wake up at 3am? Be clear as to why you are doing what you are doing.
Hope this is helpful to you in your startup journey – we’re always thrilled to engage with founders. The ideal time is when you do have some early signs of Product-Market Fit – but it’s never too early and never too late to reach out to us!

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