From Pieter Welten – Prime Ventures (@pieterwelten)
Every now and then we receive a phone call from an entrepreneur or advisor who is seeking to raise funds and who is only willing to talk to a partner. Unfortunately (or fortunately?) not to me, myself not being a partner. Sometimes we also receive a phone call or e-mail from a CEO who wants to meet face-to-face, because the business plan is ‘all in his head’ and therefore he hasn’t written one. Unfortunately I have many more examples and I can promise you that there is a better way to engage with VCs for the first time. Therefore I wanted to share the following with you so hopefully these unfortunate mistakes can be avoided in the future:
- Team Dynamics: Overall VCs are managed by relatively small teams in which people work closely together. Certain people within these teams are key decision makers and can approve deals (or write cheques), i.e. partners and sometimes principals. However, it is very likely that all team members can assess whether a company fits within the VC’s investment scope or not. Hence, I can promise you that interesting companies who fit the key investment criteria will be introduced to the relevant people, whether it is a key decision maker or not. Concluding: In my view it is pointless to demand a partner if you don’t have a warm introduction or personal relationship with him or her.
- Business Plan: Since we review thousands of businesses a year we can’t take meetings with every entrepreneur and therefore we demand a business plan in order to make an initial assessment of the business. A business plan also allows us to better understand the entrepreneur’s mind-set. Concluding: I believe it is extremely challenging to organise a F2F meeting with a VC if you haven’t written a business plan. Especially when you don’t have a contact within the VC firm or are not introduced on a personal basis.
- Confidential Information: Sometimes we are approached by a company and request some follow-on information. After we have reviewed the pitch deck, we often ask for some additional information, yet at the same time we explain why we would like to get that information. Despite our arguments, some entrepreneurs refuse to disclose it and demand a F2F meeting, because it is too confidential. Concluding: First of all, I’d like to recall my previous statement for this one. Secondly, I can tell you that we keep information confidential, we don’t need to sign an NDA for that.
I will consider covering other ‘no-go areas’ in a follow-up blog in the future. I just want to reiterate that I find it very unfortunate that some people are making these ‘mistakes’ when they reach out to a VC. It is not an ideal start of the process, because you are simply taking less serious, and you can easily avoid it. Finally, no, I don’t hold any grudge against these entrepreneurs. I can also promise you that some of my VC friends have similar experiences. But these mistakes are unnecessary, and unnecessary mistakes are very unnecessary.