Filter your VCs

Fred Wilson discusses a blog post by the CEO of eShares about his fund raising experience. Let's throw in my experience as an investor presentation designer (both for startups and VC/PE funds themselves).

• A decision in 5 minutes. Yes, most VCs will make a decision whether an investment merits deeper due diligence in 5 minutes.
  • This might actually be good news for startups. If you have a good deck, you can get to a decision without travel-meeting-travel. 
  • It proves again that a 5 minute pitch is not 5 minute filled with fluffy buzzwords.
  • If the feedback from a phone call is "no", it is probably highly unlikely that banging the VC on the head for 60 minutes in a meeting or coffee chat is going to change her mind. Better spend that energy on another investor. If you ask why, and she says "the market size" politely, coming back with 50 slides about the market size is not going to change her mind. Market size is probably not the real reason
  • That coffee chat, is actually a meeting that is further in the due diligence process: you passed the first stage (you seem to have an investable idea), now things have moved on to checking you out as a person/CEO. There is no better way to do that then a brief meeting. Even if you just talked about the weather, the investor will make up her mind about you.
• Risk-related questions are a sign that you are moving in the right direction. An interested investor is trying to figure why she should not invest in you, much better than a bored investor trying to fill the 30 minutes with asking questions why she should invest.
• Combine the above points and you can see the implication for your pitch deck: very focused, highly emotional, visual, charts to get the big idea across in a few minutes, and actually more charts for those risk-related questions, to take the obvious questions out of the investor who has bought into the basic idea.
• Investors are increasingly specialised and have a specific mental model against which they evaluate opportunities. If your business does not fit a specific model/investor profile, find a different one rather than forcing let's say a semiconductor business into a CAC/LTV/churn SAAS spreadsheet
• One more point about the 5 minute pitch. I had client briefing meetings where I only go the point of the pitch after 45 minutes of discussion. I tried from the left, from the right, tried again, thought it was just me who was to ignorant not to see something, until finally the coin drops. Be very perceptive when someone in front of you who is willing to grant you the 45 minutes, this might just save your 5 minute pitch.

Reading body language is important skill that can save you a lot of time and wasted effort.

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Art: Company of ladies watching stereoscopic photographs, painting by Jacob Spoel, before 1868