How to Engage #VCs – A Primer for #Entrepreneurs

I’m very surprised at how many founders think that we’re jerks when they, in fact, are acting like wild animals.

Successful entrepreneurs know how to engage VCs. We’re not some elusive species.  We’re human just like everyone else, and yet I’m very surprised at how many founders think that we’re jerks when they, in fact, are acting like wild animals. This primer is designed to help entrepreneurs understand VCs a little better in the hopes that we can have more meaningful interactions and avoid some of the blunders that cost entrepreneurs a funding opportunity. Quite frankly, these aren’t just things that drive VCs nuts, they are basic rules for being a good person.

  1. Don’t talk to VC’s when you’re drunk. OK, this seems obvious; however, you’d be surprised how many times drunk founders approach VCs at mixers. For some reason, there is a lot of booze at start-up and VC events that some people enjoy just a little too much. I’m not sure who thought it was a good idea to mix these two things, but I strongly suggest you avoid the bar if you want to impress anyone. I once had a drunk guy come up to me at SWSW and declare, “so you’re one of those {expletive] VCs I’m supposed to be networking with so I can get my company funded, so lets talk.” Needless to say, I moved on.
  2. If you want funding, ask for my advice, don’t ask me for money. It is surprising how often people lead with the money question, and that is just poor manners not to mention bad communication strategy. If you want me to be interested in what you’re doing, ask me for my advice and let’s both find out if I can help you. Look for smart money that will be able to assist your company to grow, and if I see you doing that, I’m more likely to be interested in you also.
  3. If I don’t answer the phone, don’t keep calling over and over (same for texting). Seems like a simple thing, right? And yet, on one deal we were pretty much ready to sign one day when the founder kept calling and calling until my partner and I were just begging for him to stop. He was pestering us to sign the funding agreement, and we were very preoccupied with a credit facility emergency with a different portfolio company that had to be addressed. Our investment in the other company was very significantly greater, and had to be the higher priority. We realized after many back-to-back calls from him that he didn’t respect our time, that things would only get worse if we did the deal and so we decided to walk away from the deal. If founders are jerky up front, things usually don’t get better after we give them money. So just show some good phone manners and respect my time in the same way you would expect.
  4. Don’t monopolize the conversation. Another no-brainer, but one that is repeatedly violated, most often at events where a VC is in conversation with a group of founders from different companies. Typically, we will try to get to know everyone by asking questions to each person about their company and what they’re doing to change the world. Invariably, one or two people in the group think that this is a competition to see who can one-up, interrupt and dominate the conversation. Instead, introduce what you do and ask others the same. VCs will notice that you prefer to learn than lecture, a good attribute in a founder.
  5. Get value from the “no”. If I turn you down, don’t be a jerk. It is OK to ask why I’m not interested, and even to ask if I know a VC that might be interested, but it is not cool to just roast me. VCs say no 95% of the time or more. It is just a simple matter of supply and demand, nothing personal. However; I’m impressed when someone is thoughtful enough to thank me for my time and consideration, then asks if I can share feedback or suggest another VC that might be interested in the investment. That is smart. If I take the time to listen to fully evaluate your company, I started with the idea that this might work. If it doesn’t end that way, ask me why. I may not always feel like I can share, indeed there may be a confidential reason I can not provide, but it doesn’t hurt to ask me why. If you do, you may get valuable feedback to improve your business model or help you realize how your company is perceived. Furthermore, asking if I know anyone who might be interested in your company may result in a referral to a good funding source. So please resist the urge to assume we’re jerks for not giving you money, and get some value from the “no”.
  6. Avoid superlatives, balderdash and hyperbole. Wild claims and broad statements are usually a sign that the entrepreneur is either overconfident, foolish or dishonest . I went to a pitch once where the founder stated that they were the first company to do something when I knew, for a fact, they were not. I knew because I founded a company based upon that same business plan almost ten years before, and sold it to a strategic seven years later. There were, in fact, a lot of competitors, and by stating they were the first, the best, etc., they just showed that they were ignorant of the real market and totally unprepared for funding. Please know the limits of your technology as well as your competitive marketplace, and be prepared to discuss them with honesty and integrity, avoiding the breathless reporting of meaningless, management jargon.
  7. Don’t turn the one minute elevator pitch into five minutes. If a VC gives you a time limit for your pitch, please observe it strictly, unless the VC invites you to go into overtime. This happens a lot on pitch days when companies exceed their allotted time. Look, I know you have a lot to say, but the ability to concisely deliver a compelling message is one of the best indicators that a founder will be successful. Doing so shows that you know how to sell, and respect the time of the person you’re talking to. If you don’t respect other’s time, it also speaks to a lack of empathy and possibly integrity.
  8. Don’t bring up valuation unless I ask first. I previously stated that you shouldn’t lead with money, but let’s be frank: don’t bring it up unless asked first. Talking about your company valuation is kind of like bragging about how much you paid for your pants. No one wants to hear about it, unless they intend to buy some for themselves. So, don’t waste valuable time talking price, until you’ve sold me on the value of the pants themselves. Once I’m convinced that you have a company worth exploring further, I’ll ask and you’ll know that I’m really interested. That is a good signal for entrepreneurs that my interest is piqued, so make the most of it.
  9. Don’t trash talk other VCs or angel investors. Investing is a team sport. Funds don’t go it alone, and we prefer cooperation more than most industries because it reduces risk and improves returns for everyone. We know that it is in the interest of all to get as many smart people as we prudently can to advise and help a portfolio company. VCs invest in teams, with each round of funding bringing in other VC firms who have value and experience that is relevant to the asset. That means that most VCs are frequently friends and serial business partners. I respect them a lot, and value them highly. If you think I’ll be impressed when you trash talk the last office that said “no” to you, well I’m not impressed. That kind of behavior shows that you may have trouble working with other people, and reading a market, both are very bad traits in founders that we seek to avoid.
  10. Don’t show up at anything personal hoping to connect with me, like my kids athletic event, or heaven help you if you knock at my home. Nobody likes a stalker. I’m more likely to call the cops on you than even consider funding your company. Another no brainer, and yet I have more than one example where people tried to pitch to me while I was trying to watch my kids play sports at school. It is nice if you realize that your kids team and my kids team are in the same league, but please, let’s just enjoy the game. Use this time to show me that you can set appropriate boundaries and allow me to enjoy some precious time with my family. Don’t be a stalker.
  11. Google me, find out what I’m interested in, and engage me in a conversation beyond your company. Some might find this creepy cyber-stalking, but I just consider it good recon. If you know the people you want to meet, you’re more likely to be able to build a foundation of trust. Find a genuine area of common interest and build upon it. I’m impressed with someone who tells me that they googled me and discovered an area of common interest and we can chat about that for a while. An important caveat: don’t try to fake it. Disingenuous interest is easily seen through if you only have a quick, Wikipedia education of something I’ve enjoyed my whole life.
  12. Don’t go on and on about where you attended college. I don’t care if you went to Harvard, please show me what you can do. Your education is nice, but there are a lot of people who emphasize it too much, as if education is some kind of guarantee that they are smart. And let’s face it, Harvard is a nice school, a good fall back if you can’t get into the University of Chicago, but where you go to school is not as important as what you are doing with that education. Remember, a lot of smart people don’t go to top tier schools, and will work you under the table. Hungry, resourceful, hardworking brilliance is something VCs look for in founders. Think smart, gritty and determined, not educationally stunted by virtue of lofty expectations with little substance to back it up.
  13. Smile. Yep, I said it. Smile. It is amazing how by just being happy, and feeling good, you subtly influence others to do the same. Smiling is free, and appreciated by all. Launching a start-up company is a full-contact, extreme sport. So, please show that you enjoy the challenge, and help your founding team to stay positive in the face of their challenges. Changing the world is hard but rewarding, so make sure you enjoy the ride.

Author: Joe Merrill

I'm a VC in Austin, TX.

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