(Photo by Flickr user reynermedia, used under a Creative Commons license)
Technical.ly’s Editorial Calendar explores a different topic each month. The May 2018 topic is venture capital. These stories explore trends in startup financing.
For startups considering the venture-backed route, an infusion of capital can be a pivotal moment that helps fill up the office, raise up regional or international outposts or get a product across the finish line.
Really, venture capital is about having the resources to validate (or disprove) a business model.
But the road to the term sheet, as any startup can tell you, can be a challenging one. It can start with doing loads of research, polishing slide decks to exhaustion and persisting until that first make-or-break meeting is set up.
But what then? How can entrepreneurs leave that first meeting — whether it’s a full-on pitch or a chat over coffee — having raised real interest?
We spoke to more than a dozen Philly investors about how their ideal first meeting with an entrepreneur should go. Read up before you head into the pitch room.
Dare to dream
“My ideal first meeting is when the founder gets me to dream with them,” Kopelman said. “And I find myself thinking back to the founder, their idea and the opportunity several times later throughout the day.”
Mind the ‘shopping’ list
“[Entrepreneurs] should cover the problem they are solving or the opportunity, the product or service they have developed, the market size, how they are going to market, the competition, the team, the business model, 3 year high level projections, how much they are raising and use of funds, and terms if they have a term sheet,” Weber said. “In the ideal presentation, the entrepreneur covers these areas clearly and concisely. They do a great job of listening to questions and responding, and ideally have someone with them that can take notes regarding questions to be followed up on later.”
- Doc Parghi, Operating Partner at SRI Capital
“The [ideal] entrepreneur accepts feedback thoughtfully, and refrains from being defensive,” Parghi said. “The entrepreneur displays a good handle on their competition, and being able to articulate how their startup fits within the existing competitive landscape. For us, it’s about the entrepreneur as that is ultimately who we are betting on.”
Ditch the script
- Vanessa Chan, Partner at Robin Hood Ventures
“Entrepreneurs always have a prepared ‘pitch’ that they want to deliver which gives investors a basic view of the industry and their company,” said Chan. “A great meeting is one where the entrepreneur has the confidence to abandon their canned responses and can verbally/mentally spar with me and admit if they don’t know something and will get back to me. The reason why this is important is that no entrepreneur has the perfect plan and they need to be able to listen and respond to changes in the market.”
What about the customer?
- Jayson Tischler, Principal at Rittenhouse Ventures
“We want to walk away from a first meeting knowing that entrepreneurs can tell their story from a customer’s perspective,” Tischler said. “We prefer to learn the business fundamentals — sales cycle, pricing, implementation process, competition, etc. — through clear, concrete examples of their start-to-finish relationships with real target customers. These well-defined customer examples serve as a starting point for us to mutually build an accurate, long-term growth strategy, as the company uses our capital to scale across the broader market.”
Do the homework
“My goal for the first meeting is to get to know the founder and get a sense for the company’s traction, experience, value proposition, and how they plan to grow the business,” said Flanagan. “Sometimes they are unprepared: arriving late, haven’t done their research on me or us, don’t know their pitch and don’t follow-up.”
Tell your story
- Brett Topche, Managing Director at Red & Blue Ventures
“An ideal first meeting is a conversation, not a pitch,” Topche said. “More than anything else, I am trying to get to know the person, their story and what led them to the passion, unique market insight, etc. that forms the basis for the company. Tell me the user’s story as well — what problem are you solving for them, why is it not adequately solved today and how you solve it not just differently but better.”
Is the tech good enough?
- Jane Hollingsworth, Managing Partner at Militia Hill Ventures
“We build companies from the ground up, starting with great science,” Hollingsworth said. “In a first meeting we would love to see an entrepreneur who has found or is the inventor of a groundbreaking technology that can be a strong foundation and starting point for a successful company.”
“I want to see that this person is willing to go the extra mile and put in the work,” said Howard. “Entrepreneurs are just like athletes: They have to have discipline and the ability to get up when they get knocked down. Most importantly, I want to see if this entrepreneur is a good person. Aside from solid financials, the person has to be a good fit for our team.”
$100 million? Seriously?
- Kapila Ratnam, partner at NewSpring Capital
“The [item] that has always amused me to no end is the entrepreneur who has no revenues today and is absolutely confident that he/she will have $100 million in sales revenues tomorrow,” Ratnam said. “A realistic [profit and loss statement] with reasonable assumptions for cash needs to grow the business, knowing full well that the team will be accountable for it, is much to be desired.”
Honesty, even when it’s bad
“Companies often feel tremendous pressure to raise money,” said Mencin. “This can often lead some founders and management teams to overly exaggerate their company’s accomplishments and to not recognize challenges they are facing or weaknesses they have. Most experienced investors can pick these up pretty quickly, so not being honest can turn off an investor from exploring further because they already have a lack of trust. Its better to be upfront about challenges and shortcomings, entrepreneurs and investors can then work together to solve the problems.”
What problem are you solving?
- Gail Ball, Managing Partner at Chestnut Street Ventures
“There is so much meaning to glean from the founder’s storytelling about the real problem they think they are solving and how deeply they are tied to the idea of solving it,” Ball said. “The best meetings end with both of us agreed on what’s next — even if it’s nothing!”
Easy on the pressure
“Their goal is to make a good first impression and to get a second meeting, not necessarily to push to hard to get an investor to write a check after the first meeting,” Horowitz said. “My advice for entrepreneurs is to very quickly explain what problem they are trying to solve, how they solve it, and why they are the right team to solve that problem.”
Show them the data
- Karen Griffith Gryga, Chief Investment Officer at Dreamit Ventures
“An ideal first meeting with an entrepreneur involves an entrepreneur able to effectively and succinctly convey their core value proposition, vision, critical assumptions,” Griffith Gryga said. “They [should] have data supporting their critical assumptions and against which assumptions they still need to acquire data as well as current metrics and milestones.”
Money Moves: These 5 Philly-area companies just raised millions in VC funding
You can make a literal elevator pitch to Robin Hood Ventures investors
What’s slowing a wider adoption of impact investing?
7 biz resources we learned about at Super Meetup Philly 2019
Ben Franklin Tech Partners just invested $1.75M from its new GO Philly Fund
Haircare startup NaturAll Club is getting ‘a blank canvas’ in Bok building
Why this Radnor-based VC firm thinks impact investing is on the rise
Paid family leave adds to the perks at Chariot Solutions
Sign-up for daily news updates from Technical.ly Philadelphia