My whole career, I have had the privilege of working with entrepreneurs. In pitch meetings and board meetings at Bolt, we often hear quotes we have heard before, that trigger a “pattern matching algorithm” which tells us what’s really going on. In this blog series, I share some of that experience to help entrepreneurs on their journey to creating highly valuable companies.
“We have so much interest in this round. I have ten pitch meetings in SF next week”
The above quote will make every experienced VC cringe, and some will immediately move on to the next investment opportunity.
Founders often believe that getting a lot of initial meetings on the calendar when they kick off their fundraising is a good thing — but experienced entrepreneurs will tell you otherwise.
It gives the exact opposite impression than the entrepreneur wants to show: Instead of showing that they have a lot of traction in the fundraising process, having a fully booked calendar indicates that the entrepreneur is inexperienced and doesn’t have a real fundraising strategy.
What’s going on here?
- Venture capital is viewed as a commodity as opposed to a business partner to help build a great company.
- This entrepreneur is inexperienced and inefficient at raising capital.
A strong lead investor can have a huge impact on capturing the upside of the company’s business opportunity.
Attracting the right investor can be one of the best decisions in the journey of an entrepreneur.
High-quality entrepreneurs should check how many billions of dollars of market cap the investor they are speaking with has helped create. They should ask themselves the question “Who do I want on my team?”
A key process of attracting strong investors is relationship-building. Entrepreneurs are raising the investors’ hard-earned (and/or hard raised) capital and are asking the investors to join them on a five-to-ten-year journey to help build a great company. No credible investor will engage if they are viewed as a commodity.
I understand the temptation to speak with may investors simultaneously, but the fact is that it just doesn’t work. Before the start of fundraising, entrepreneurs should have a well researched, lead list of investors, and ideally have built relationships with a few of us over time (without pitching). This list can be rather long and can include investors who don’t lead, strategic investors, investors in other geographies, etc.
As founders get ready for fundraising, they need to have a well-articulated pitch prepared. They should ensure to refine the pitch further with their existing lead investor (if they have one — and they should) or a few experienced outsiders.
When founders actually start fundraising, they should pick a small number of investors from their list — around five is a good start.
Most fund raisings don’t go perfectly at the beginning. If the well-targeted “initial five” don’t pursue an investment, founders should honest with themselves. Five rejections probably means that the next five are unlikely to want to invest. Founders should take this as a learning opportunity, and use the feedback from the initial pitches to refine the story and to make progress on the business. This gives them a chance for a fresh engagement with the next five on their list. Remember, there is no second chance to make a good first impression!
A better strategy
“We are looking for the best lead investor for our company. You would be a great person/firm to work with. We are also considering a couple of others as lead investor.”
Bolt invests at the intersection of the digital and physical world.