VCs are notorious for kicking tires.
VCs take a meeting just to learn about an area. If deal flow is slow, a VC will take a meeting if you and your team seem mildly interesting even if your product isn’t. Sometimes, if you seem well connected to other founders or VCs, that will get you a meeting—because you don’t want to miss something everyone else has seen.
Some later stage funds will take a meeting long before they ever plan on writing a check with the promise of “opportunistic” seed investments (to the guy or girl they went to grad school with). Some VCs have no money left in their funds, but they still like playing VC.
You could complain about this as bad VC behavior, because wasting a founder’s time is a mortal sin in Startupland, but I wonder why we’re letting founders completely off the hook in this process.
If you had a salesperson and they spent all of their time with inbound leads that didn’t pay off, you’d have to let them go. The ability to qualify a lead and spend time in your pipeline commensurate with the likelihood of payoff is a critical skill.
Or, you could blame the leads.
Fundraising is a sales process for shares in the company.
Is it the lead’s problem that they aren’t serious buyers? A great salesperson would figure that out right away—and qualifying your fundraising pipeline is a critical skill for a good fundraiser.
So how do you qualify a VC in your fundraising pipeline?
Ask Pointed, Specific Questions
Do you lead?
Do you have dry powder for this? How much?
Do you have the bandwidth to work on this?
Do you see a reason to turn this down right now?
What do you feel you need to be convinced?
What do you feel you need to convince others in your firm?
I believe X, Y and Z key things that cause me to believe in a big outcome. Do you agree with all three? Do you think the outcome could be as specifically big as I do?
What work will you do next to either convince yourself to do this or not to do this?
When can I expect this will happen?
If you walk out of a meeting and you don’t know anything more than “They thought it was interesting…” then you didn’t ask enough about where they were at on this.
Manage Your Time
Control the time and structure of the meeting.
Have a plan for what you want them to know—have questions to make sure they understood it and come to next steps that either move them forward in a process or off the potentials list. Use some old school sales tactics like, “I’m going to use this first ten minutes to determine whether this is a fit—would you be willing to give me back my time if you determine right away that it isn’t? I have plenty of calls and e-mails to make and would appreciate a quick wrap up if you’re not interested to hear more after that time.”
Seniority Within the Firm
Some non-partners at a firm can lead a deal—but the reality is that if you’re scoring your VC leads on likelihood fo close, you have to take points off for junior VCs or partners who probably have less pull. The partner who just got promoted from principal undoubtedly will have a lower close rate than the partner whose name is in the door or who founded the firm.
That’s not to say you shouldn’t pitch people besides the most powerful partner that everyone else is probably pitching—you just have to be careful you’re not leaving yourself open to being disappointed at the finish line because they didn’t have the internal pull to get it through the partner meeting.
Circumstances of the Meeting
Did they feel obligated to take the meeting because of an intro or do they have a stated interest in the space—or even better, did they tell you specifically why they’re interested in your company?
Scheduling and Cadence
An interested VC won’t wait a week or two when a round is in process to meet. They’ll get back to you right away without you prompting it. They’ll even introduce you to others in the firm before you walk out the door. If you feel like you’re pushing the deal forward, your chance of closing are defiantly lower.
Researching the Space
Ideally, the investor either already knows what they’re looking for or you’ve so clearly articulated the opportunity that they don’t need to take time to get up to speed on the space—or, you’re so clearly the expert team that they trust you know what you’re doing. Anyone who has to start from scratch on a space isn’t your most likely next close.
Lack of Vigorous Agreement or Disagreement
If a VC has strong opinions, you can have a back and forth. If they’re just not engaging at all, there’s a good chance you’re looking at a pocket veto.
A pipeline should feel active—a living, breathing organism with flow and movement, not a sack you’re dragging up a hill. Remember, there is way more money out there than good ideas—so if they’re not chasing you, you probably haven’t done the job of being convincing.
If you can’t get a read on VCs at all, you may want to check out Feedback.vc, where you can get aggregated and consistent feedback from an anonymous panel of venture investors.
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