Sadly, most people fail at this task. The problem is that only 86 VCs made investments last year, but there are thousands of startups being founded. The odds of a startup raising a Series A is very low -- perhaps less than 1 in 10.
While there are other avenues for financing beyond venture capital, my preference was to seek out an established VC firm. I wanted a partner that was working with other founders like myself. Also, good VC firms not only fund your Series A, but they also set aside additional funds in case you need more money later. Since a founder’s number-one job is to not let the startup run out of money, this is important.
My Series A process kicked off when I began working on the pitch deck. Coming in at around a dozen slides, this PowerPoint presentation was the script from which every conversation I had with investors was based. At a minimum, a pitch deck should include a description of the problem you are solving, the product, the market, and the team. I also had a five-year pro forma financial statement in my back pocket. Everyone knows that it will ultimately be wrong, but it does show how you’re thinking about the business.
The other thing I needed was a product demo. Fortunately, we had already built a working product. And having done so many sales presentations, I knew the product inside and out.
Once the deck and demo were ready to go, I began scheduling meetings. Some firms had approached me. Other meetings were the result of inquiries or introductions made through my current investors. It’s important is to try to schedule these initial meetings in a compressed, three-week to four-week timeframe. A fundraising process that drags on can give VCs the impression that you can’t get it done.
In the first few weeks, I met with or spoke to about 20 firms. Sometimes I would meet with an associate who would introduce me to a partner. Other times I met directly with senior partners. Each meeting followed a similar pattern: VC briefly tells you about their firm, you tell them about your startup, followed by a friendly but consequential question and answer session.
Some VCs focus mainly on product, while others are all about the market you are going after. They all want to know what makes you tick: Why you are doing this, how long do you want to do this, and so forth. The answer should always be that you are in this for the long haul and want to create a significant business.
Usually, by the time I walked out of the meeting, I would know if there was a fit. Sometimes when it was obvious that the VC wasn’t going to invest or would be too much trouble to work with, I would preemptively break up with them. It can be empowering to tell someone “no” (nicely) when you’re the one looking for money.
If the initial meeting went well, I would often be asked for additional information: financial models, customer references, product engagement metrics, team bios and so forth. And then I would get the message that every founder raising venture capital hopes for: “Matt, we want you to come in on Monday and present to our partners."
Next week I’ll share what happened next, and if I was ultimately successful in raising a Series A.