I am editing the final version of my book on CVC and thought this worth sharing with anyone raising capital from VCs or CVCs…
Everyone will tell you the best way to approach a VC or angel is through a warm intro. Beyond the obvious, contacting their portfolio CEOs is a smart way to get the warm intro and do some DD on the VC to see if their existing CEOs like them. That said some of our CEOs are much harder for you to get through to than many busy VCs. The key thing to understand is that VCs get a high volume of deal flow via email and they often have very little time to spend looking at email on a daily basis. VCs schedule a lot of pitch calls with founders and book their days and evenings with dinners and events. So when you send a VC your pitch via email I think it is critical to understand that the VC is most likely triaging deal flow email as if it’s the emergency room tent in a war zone. The VC is trying to as quickly as possible figure out if this is an investment opportunity she should spend time on, forward to someone else on the team for more analysis or expert review or save the team time and pass on it quickly.
For me personally I hate it when the CEO sends a lot of information, but hides the stage the company is at. It is hard for me to review a long text cover email in big block paragraphs and a long slide deck and all the information I see appears to be about the vision of what the founder wants to do and I just can’t for the life of me figure out what milestones have already been accomplished and understand what stage this company is at. Sometimes it is literally on page 42 where the founder mentions that the company is totally bootstrapped or has raised $10m from tier I VCs.
I like it when the entrepreneur tells me in bullet point format in the cover letter of the email a few key things such as:
- How they were referred to me (name of someone I might know that referred them to me, an event, TV, just found me on LinkedIn or read one of my books. It’s all good, but it saves me time if I see that right at the top)
- Total funding to date and distinguish between non founder outside capital and founder self funding
- Mention any other investors I may have heard of including big name angels, VCs or corporates
- Current monthly and annual revenues
- Key milestones so I can understand what stage they are at
- How much they are seeking to raise
- What stage they are in the process of raising that funding
- Location of the HQ and team members
This is what I want to see before reviewing twenty slides of vision and pitch. It may be too much to ask for, but if the founder hides this info deep in the presentation or keeps it a secrete I end up flipping through slides very quickly trying to find this information, checking Crunchbase and other online databases to see what stage the company is at and if it is remotely a fit with our investment strategy. If I get my key questions answered up front I can calmly go through the slides and natural flow of problem, solution, vision, pitch, etc.
When I see a really bad pitch I email the founder back and pass on the deal so that it does not take up more time from our team. A founder should never email more than one person at the same venture team. That’s making more work for us. If the founder is really good at raising capital then it is less likely the company will run out of cash – the number one cause of death for startups. If I spend a few minutes trying to figure out what stage the company is at and can’t find it but it was sent by someone I know, I forward it to an Associate on our team to review and either bring back to one of the other members on our team or email the entrepreneur that we are a pass. Processing a high volume of deal flow is a real life challenge for every good VC. If you require additional time for the VC to find out the minimum amount of information they want to know you are making your case worse off. Some entrepreneurs email saying they will only share the deck in an in-person meeting. That does not give me enough information for me to know if I want to take a meeting. That email cover text better be really great to get me to take a meeting without reviewing a deck. One more meeting or conference call means less time to process many emails.
When an entrepreneur asks me to sign a Non-Disclosure Agreement (NDA) before giving me any decent information to form the decision to take a meeting or not I decline right away and advise them to stop asking for NDAs from VCs. I would not mind signing the NDA if I had more time, but it slows me down from triaging other deal flow and makes it harder for me to later raise capital for that startup from other VCs when I know they will send my fellow VCs the NDA and most VCs have a policy of not signing NDAs or don’t want the torture of killing time with the NDA. I think it’s good to get right to the point.