Posts from Fundraising

In Between: The Tough Place To Be

In a comment on the latest tally of VC fundraising, NVCA President Mark Heesen said:

“The venture capital fundraising environment has settled into a ‘new normal’ which is characterized by a barbell structure of larger funds which are stage and industry agnostic on one end, and smaller, early stage, industry or region specific funds on the other.

This is certainly true and has been for a long time. The two successful models seem to be the large megafund and the small early stage fund. It's hard to be anything else in VC.

Entrepreneurs need to understand this. There are a ton of options out there for early stage funding. And if you get to the stage where you need a growth round from a big fund, there are plenty of options for that too. But if you are looking for a Series B round to help you grow from early revenue status to true growth status, you are going to find that challenging.

To put it another way, there are plenty of us who fund hopes and dreams. And plenty of us willing to fund true success. At the stage where you are past hopes and dreams, where you have customers, revenue, and a real business, but have not yet reached "true success", there just aren't many investors to choose from.

The truth is early stage investors are often asked to be the funders of last resort for the "in between" stage. We do that all the time at USV. We will lead or do an inside round for the Series B and Series C rounds if we have to. So choose your early stage investors well. Make sure they are willing to see you through the in between phase if need be. Because they will probably need to.

#VC & Technology

Six Slides, Three Slides, or No Slides

I read a blog post (via Hacker News) this morning that suggested three slides is enough.

I've written that six slides is what got it done for us.

And the best presenations I've seen lately used no slides, but started with a live demo of a working web app and went from there.

Nothing beats a demo in my book. It allows the founder(s) to talk about what they built, why they built it, and where it is going "in situ."

So think about ditching the pitch deck and using your app as the backdrop for your fundraising meetings. I am confident you'll like the results.

#VC & Technology

Phone Pitches

I exchanged some blog comments with Tereza yesterday. She's starting a web company and is raising angel money. She said she did some phone pitches against her better judgement and they didn't work out. I advised her not to do them anymore.

Here's my thing about phone pitches. They aren't very effective. I hate taking them and almost never do. I don't think they allow the entrepreneur to show themselves very well which is the most important thing of all.

And it is so easy to say no over the phone. There's no real human connection. It's easy to pay half attention or less on the phone. It's easy to fake that you are listening when you are not.

I admit that I am really bad on the phone. I always have been. It's not a medium that I like very much. So I am probably worse than the average investor. But even so, I think doing phone pitches is a mistake and you should avoid doing them.

I do think a short phone call introducing the opportunity at a very high level and making the case for an in person pitch is an important thing to do. You can accomplish that in a few minutes or less. It's basically an elevator pitch. But don't agree to do the whole pitch on the phone. Ask the investor make time for you in person to do that. That will determine if they have sufficient interest for you to invest your time with them.

And what about a video chat on skype or another similar service? I do think a video chat is sufficiently better than a phone call to make it a semi-viable alternative. If a plane ride is required to see an investor, then a skype/video chat is a decent first step. But again, you should do it with the objective of getting an in person meeting. 

But if you can visit the investor in person without getting on a plane, I think you should always opt for that over a conversation over the phone or skype. There really is nothing like the in person, face to face meeting when it comes to fundraising or any kind of high level sales effort.

Fundraising is such a hard thing to do, particularly for first time entrepreneurs without a track record and an investor following. Don't make it harder by putting a wire between you and the investor.

#VC & Technology