Raising VC money: how to handle the 1st VC meeting?

This is the third post in a Friday series on “raising VC money”.  For the list of topics we are covering, click here.  In this post, we’ll focus on “how to handle the 1st VC meeting.”

So, you’ve done some research and have come up with a short list of VCs (suggestions here) and you’ve figured out a way to ask the VC for a meeting (more here).  He accepts.  The meeting is on, and it’s show time.

What now?

Now, this is going to be a strongly-worded observation.  But, entrepreneurs need to know this: after 15 minutes, a VC usually knows if he wants to invest.  Your presentation may last an hour or more, but at minute 15, you are at the point of no return.  The VC will do a lot of due diligence to confirm his instincts, but his “gut” has spoken.

I know 15 minutes doesn’t sound like a lot, but VCs are in the “pattern recognition” business.  They’re like doctors.  When your physician sees you, there’s a Q&A session.  They ask you about symptoms, and quickly, try to get down to some probable root causes.

A VC is similar.  An experienced VC normally is able to get a feel for your team, market and product very quickly, and with some questions, will get a sense as to how attractive your business idea is to him.  Most VCs will say that it takes about five years to develop this mental screen.  It’s one reason why it takes a long time to get decent at the business.

Given this phenomenon of a snap judgment, here is some advice.

Advice #1: present only 10 slides.  When I worked at Bain, we assumed that it takes about three minutes to present each page of a PowerPoint.  Decades later, I still find this to be a rule of thumb.  Now, if the VC asks a lot of questions, go with the flow, but make sure you can cover your part of the meeting in 30 minutes or less.

Advice #2: make a personal connection early on.  This doesn’t have to be much or take a long time, but do it.  I remember the first time I meet every entrepreneur whom I decide to back.

Advice #3: manage the meeting well.  When I meet an entrepreneur, I’m looking for them to manage the meeting.  My guess is that if they cannot manage me in a meeting, they will not be able to do so with recruits, strategic partners, and customers.

Advice #4: read the VC’s body language.  I met with an entrepreneur a few weeks ago.  He had an interesting idea, but started with a lot of slides on his view of the market.  It was thoughtful, but one I knew pretty well already.  So, I told him that it might make sense to skip those slides and get to the product.  After saying OK, he then proceeded to plod through his presentation, at the same pace.  I then suggested a second time.  Nothing changed.  So, I gave up and just let it go.

Similarly, if a VC is interested, they will become increasingly excited.  They’ll get more aggressive with their questions.  They’ll begin to lean forward in their seats.  They’ll start to sell their firm’s capabilities.  They’ll propose next steps.  You have won the meeting.  They’re interested (for now).

Advice #5: don’t lie.  Don’t even exaggerate.  If you don’t know the answer to a question, an “I don’t know” is perfectly fine.  One entrepreneur who does this well is Jay Habegger of OwnerIQ.  In a Board meeting, when asked a question he isn’t prepared to answer, he says: “I don’t know, but here’s our guess and what we’re doing to dig in.”

One thing I’ve noticed is that it’s pretty easy to guess when someone isn’t telling the truth.  They usually either break eye contact or they shift their sitting position.  It’s almost sub-conscious, but it’s something I’ve noticed.  It usually means they’re not telling the truth or they’re making up an answer on the fly.

Advice #6: ask for the order.  When the meeting ends, specifically gauge the VC’s interest.  Fewer than 10% of entrepreneurs do this.  The others are missing a great opportunity to qualify a VC’s interest.  After all, why spend more time on a VC who isn’t interested?

I suggest you be very specific and force the VC to state their level of interest.  Pin them down.  Make them show their cards.  Most VCs hate to say “no,” and so, will be generally supportive but will be very vague about next steps.

Some sample questions:

–          Have you seen any other pitches in this space?

–          How can I improve my presentation?

–          Are you interested in a second meeting?

–          Where does this rate among all the plans you’re seeing?

–          When should I next touch base with you?

Advice #7: go back to Yoda.  Last week, I suggested that you get a warm intro to the VC (more here).  I called this person your Yoda.  I suggest that you go back to that person.  Thank them for the intro and report how the meeting went.  Ask Yoda to then go back to the VC to get back-channel feedback.

You will save a lot of time by doing this.  When you fundraise, you are managing a sales pipeline.  You want to focus only on the high-probability VCs.  Moreover, once you start the VC meetings, you want to move fast.  You don’t want your business plan to be perceived as stale.  So, you need to optimize ROT, your Return on Time.

So, those are my two cents.  I hope this is helpful to entrepreneurs.

Next week, we’ll cover the topic “how to handle VC due diligence.

4 thoughts on “Raising VC money: how to handle the 1st VC meeting?

  1. Hi Jo,
    Sorry about not putting in my real email address. I’m fundraising at the moment so I prefer to keep the process fairly discreet for now.
    I’ve been searching for tips on the fund raising process and your blog posts keep on showing up and they’ve been most helpful.
    I have a question on the first meeting –

    I’ve pitched about four VCs with my deck and the two that seemed most interested did not ask for me to send the deck. However, the two that didn’t seem to get my space asked me to send over the deck, and they will “think about it”. There are some confidential information I have in there that I would prefer not to have my competitor to have. What is your thought on this?

    I’ve been following your blog daily so if you can do a post on “when do share your deck”, that would be great!


    1. Hi, if you exclude confidential information, I think it would be fine to send the deck.

      One rule of thumb, though, is that the bigger the firm, the more junior staff they have. These younger members of the firm are often tasked to do a “market analysis” whereby they meet with as many companies as they can in a space, and then, pick the leading company. There’s nothing wrong with this. They’re doing their job.

      Another rule of thumb is that you should always ask the VC if they’re looking at anything competitive in the space.

      Good luck!

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