Some thoughts for founders on choosing, pitching and working with VCs — a thread
Why am I credible? I have raised $41mm from some fantastic investors, have pitched an order of magnitude more than have ever said yes, and have learned a few things in my nearly 8 years as CEO of a venture-backed startup. That said, this is all opinion and there are no rules.
Intros: VC-VC intros are less than useless. They are usually negative signal. In order of signal: 1) portfolio CEO intro 2) VC-VC intro when they’ve done many deals together 3) cold email 4) standard VC-VC intro … 9999) associate meeting
Associates: never respond to them. Ever. No offense to associates, we built a double-digit million ARR business with SDRs, so I get it ;). But speaking with an associate is, per above, worse than cold emailing the partner.
Partners are the decision-makers at funds. Ideally you want a tenured, experienced partner who has the social capital to get deals done. How deals get done inside funds is surprisingly subjective (this is betting after all) and you want your ‘champion’ to be able to drive.
…meaning that your partner selection is as critical as the fund itself, in terms of getting the deal done. Understand that you may be meeting Tier I Fund X, but if you’re meeting a partner who has never done a deal you’re making life far harder for yourself.
Partners are more important than Funds. Ultimately you’re marrying the partner for the duration of your business. Therefore never ‘settle’ for the partner because you like the fund, and listen to ur gut even if the fund isn’t the sexiest one out there but you love the partner.
Reference the VC. As hard if not harder than you reference an executive hire. Speak to everyone who has worked with them. Invest at least 10 hours of time per investor that you’ve got a term sheet from. Ask the VC for intros to successful founders AND ‘unsuccessful’ founders.
In the best case your investors are credible within the industry, can open doors for you to other experienced folks, and don’t get in the way of you figuring out how to fuck up less. That’s your goal here. Also, reputations usually exist for a reason.
If you’re independent and like to solve your own problems you may find engaging your investors hard / annoying. Put yourself in their shoes and think through what context you’d need to help you make better decisions. Usually this resolves to a monthly cadence.
Understand VC motivations. Figure out whether they’re optimizing for a 3x return in 3 years or 100x return in 10 years. It’s important to understand this lens because this will color the advice you get! In reality most investors with most startups are optimizing for the former
Highly subjective but IME the ‘portfolio services’ are mostly garbage. Dinners that drive community are great. But the firm is not going to hire people for you, they aren’t going to drive lots of revenue for you, they aren’t going to actually solve your problems.
Similarly, the events are usually for VCs and not for founders. You will be invited to lots of portfolio days and conferences. In general, don’t go to them. Build your company and build deep relationships with CEOs who are a few years ahead of you. That’s maximum ROI time spent.
Finally, your investors can break your company but they probably can’t make it. View them through this lens and you will be happy and have an easier relationship with them. Took me 5+ years to figure this one out.
Thanks to our key investors who include @bdeeter, @jimandelman, @garrytan and many more. At best your investors are the people you call when the world is ending, who help you solve the problem, and believe in you so much that you believe in yourself.