A final meeting with venture capitalists as part of a startup fundraising round can be intimidating. Like the final level in a video game, you’re very close, but it’s not over yet. Founders need to take this step very seriously. Being prepared helps your startup stand out. And these VC meetings can be fun and you can get a lot of great feedback. However, the primary goal is to pass the test and get the money. With that in mind, let’s look at some tips to help you get your funding at your final VC meeting:
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Project quiet confidence. There’s a fine line between confidence and arrogance, and it can be tough to strike the right note. One way to avoid arrogance during your meeting is to try to engage with the investors, rather than simply present to them. Invite their opinions and viewpoints. You always want to appear competent and knowledgeable, but you should also demonstrate humility and a willingness to listen.
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Know your audience. Before your final meeting, you should know your partner sponsor’s role in the VC fund. If your sponsor is a newer partner, you’re going to face more scrutiny during your pitch. So it may be more of an uphill battle, but remember that your sponsor was hired by the managing partners to bring in business, and the managing partners want that person to be successful. In addition, your sponsor is your advocate. Your sponsor is excited about your company and wants this deal to go through. So that person will help you as much as possible.
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Be polite. This is related to the “willingness to listen” mentioned above. Let the other partners talk without interrupting. This can be hard because the other partners may not have read the investment memo or know your industry. By demonstrating respect for their input, you show them how you will behave in the future, especially in a sales situation. Just as you wouldn’t interrupt a sales prospect, you shouldn’t interrupt a VC partner during a funding meeting.
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Plan for skeptics. Somewhere in that room, there will be someone who invested in a company like yours in the past, and that company failed. That history is going to make that person skeptical, and they will ask a lot of tough questions. Your job will be to explain during your meeting why your company will be different. This situation comes up over and over again. There’s an old saying: No venture capital backed startup idea is wrong, it’s just too early. You must articulate why this time is different.
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Prepare to educate people. While it’s better if people come to your final meeting having read the investment memo and done their homework, some may not have time or understand your market or industry. You need to be ready to explain your market and why your solution is important and compelling.
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Be ready to present your financials. Financial projections are very helpful in a pitch meeting. Investors have different areas of expertise, such as strategy, customer acquisition, or building products. Some of the people you’ll be meeting will be financially oriented, and your financial projections for your startup functions as a map for those investors, articulating what you think you’ll be able to accomplish. You need to demonstrate that you understand your key metrics, like your cash requirements, your burn rate, and the number of months you expect your financing to last.
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Strike a balance between conservative and aggressive. As part of your financial projections, you need to carefully consider your approach. If your projections are too conservative, you run the risk of not being interesting to VC firms. So they need to know they can get a solid return. On the other hand, you can’t be so aggressive that you lose your credibility. Projecting $100 million in revenue in year three is probably not going to happen. Projecting $20 million is more realistic and therefore more appealing to investors.
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Don’t bash your competitors. Relationships are a key component of the VC infrastructure. That means it’s very likely someone in that room has looked at one of your competitors as an investment opportunity, knows the founder or CEO of a competitor, or knows a venture capitalist who invested in a competitor. That person may have talked to competitors to get their perspective and may even parrot your competitor’s talking points to you. Just like in a sales meeting, that’s an opportunity for you to articulate why your solution is different and why they should buy your product. You need to do the same thing in a final VC meeting. Disparaging a competitor can cost you credibility, because investors will wonder what you’re afraid of.
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Anticipate pro-rata equity questions. Pro-rata equity questions are a strong signal that your meeting is going very well. If the people who are about to invest in you are really sold they may surprise you by asking for a larger share of the available equity. This is a great question to have, and the correct answer is, “Let me see what I can do. Let me go back to insiders and previous investors and see if I can figure out a way to get you a little bit more ownership.”
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Stick to your script. This is a key point. Your final VC meeting is a high-pressure situation, and you may be tempted to ad-lib and go off script. Don’t start winging it in the middle of your meeting. Stay centered on your idea, your financial plan, and why it’s so important. You need to demonstrate that you’re focused and organized. A solid VC pitch deck will help; make sure you have the ability and script down to run through it in 15 minutes if you get derailed with many, many questions from the investors.
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Show that you’re ready to go. The most important signal you can send to them is that you are ready and willing to go. Show that you really want to take this company from this funding round all the way to an IPO. Now, a lot of things can happen in between, but you need to demonstrate to them that you are a mature person who is ready to dedicate 10 years of your life to this company. That will give them confidence.
Hopefully these tips will help you walk in, dazzle the partners, and convince them to write that check. Don’t be afraid to practice. Practice with your friends, your seed and angel investors, and your management team. Remember, this is the final level of the video game and you’re almost there. If you need more information about how to handle that final VC meeting or help with your due diligence, just contact us at Kruze Consulting.
