This is part of my ongoing series, “Pitching a VC.”
I recently wrote a blog post here in which I argued that the best VC meetings are discussions and not sales pitches. Many people agreed and added that even the best sales meetings are also discussions and not pitches.
A few weeks ago I sat through two very contrasting presentations and wrote this blog post right afterward. I’m just getting around to posting now. Both presenters are anonymized. I hope that when you’re presenting to a VC this will give you some sense of what might be going on in our minds.
I had an awesome young entrepreneur come in this week to talk about his seed stage business. It was a 1-on-1 meeting between the two of us. He wasn’t really ready to raise VC but wanted to meet me early in his process and wanted some help thinking through potential angel or seed stage investors. He was introduced by a senior technology executive that I really respect in the LA area and a close friend of mine told me separately that he would like to invest if they did a friends & family round. Needless to say I was positively predisposed to this individual before the meeting started.
I highly recommend to all entrepreneurs to take the time to find the best sources of an introduction because it really does make a difference. It is worth any amount of extra effort if you are really interested in the VC you are approaching. If you haven’t already read the post on how to approach a VC it’s here.
How you got to the VC is important, but once you’re in the meeting it’s obviously up to you to make the most of it. We started by talking about this person’s background. He had spent many years at Yahoo! during the better days and we had lots of discussions / debates about Yahoo!’s strategy and missteps. But we talked much more broadly about Google, Twitter and Facebook. We talked about browsers, desktop widgets and interactive television. We talked about measurable marketing. We talked about online video and the need to build & track audiences online.
I found myself so engaged in the discussion that after 90 minutes I realized we hadn’t even broken out his PowerPoint presentation and I had a hard stop. So we scheduled our second meeting for next week where he could actually tell me more about his company. In the meantime I signed up for his product and began playing around with it to get a sense myself for how it works before our next encounter.
Importantly he did have a presentation ready to go. On any given day I could have been really pressed for time and asked to get straight to the presentation – you can never predict how the meeting will go so you must be prepared to show a deck, do a demo or just have a conversation.
This meeting was a 10/10 for me. Who knows whether I will find his company interesting when I see the details at our next meeting. But so much of my decision on investing is based on the individual(s) that getting a chance for a true connection with somebody where you understand how they think about life, technology, management, etc. is important.
This entrepreneur had a full house. He was from out-of-town so even though he hadn’t been properly vetted by an individual partner before the meeting, we had all of our available investment staff sit in on the meeting. He was introduced to one of my partners by a very trusted source so we were ready for big things.
He started by showing a 5-minute video describing why the market that he was in was such a great opportunity. It had the graphics of a highly produced Hollywood-like video with the voice-over of the cheesiest television commercial presenter you could imagine. Let me state me bias – there is NEVER a scenario where you should lead with a 5-minute video. Even worse when all it is doing is explaining your high-level market concept.
I kept thinking 2 things during the video: 1) this is cheesy and painful and 2) why is he giving up the opportunity to build rapport with us by telling us this stuff directly?
After 2 minutes of torture I suggested that we stop the video. He seemed uncomfortable doing that so he let it keep running. After 4 minutes I instructed him to stop it. He reluctantly did. We asked the individual to tell us what he actually did. The video was so high level and was explaining how advertising was all becoming measurable (duh) but we had no sense what his company’s role in this process was. We all know that television broadcast commercials are not targeted. We all know that many companies have tried to deliver targeted advertising on the web. Sir, what do you actually do???
What struck me is that he was never able to get into a discussion about the past of targeted advertising technologies – what had worked and what hadn’t. We weren’t able to have a discussion about who his target customer base was, why they would use his products and why advertisers would pay for that. We didn’t get a chance to adequately discuss the chicken-and-egg problem of getting users signed up and advertisers signed up simultaneously for which his business was dependent on.
Basically, the fundamental problem that I saw with the whole painful hour was that he was in “sales mode” the entire time. He was so concerned with getting across his points that he failed to have a dialogue and engage us. A VC is never looking for you to have all of the right answers and the best VC’s know that we don’t either. We just want to hear how you think about your business, your industry, your competitors. We want to hear that you’ve thought about the risks. We want to hear your mental flexibility on issues and how you debate them.
I guess there are some similarities with the infamous “case” interviews that strategy consultancies give. It’s not always the actual answer we’re after but the quality of your thought process and how you arrived at the answer. Through this discussion you establish rapport and we build a relationship.
It wasn’t going to happen with this individual. He ended the meeting by telling us that he wasn’t really even raising money. If he had been raising money he would have been prepared to discuss all of these issues. He was defensive and seemed affronted that we wanted to discuss the complexities of building his business. I believe in seeing VC’s before you’re ready to fund raise (see my post here), but if you’re not prepared to have a discussion or debate about your company or industry then don’t bother.
I am left wondering if he really had no interest in ever raising money from us – why was he there? Why would he waste his time and ours? Sheesh.
(Cross-posted @ Both Sides of the Table)