A piece of advice that we hear being given out a lot in the startup world is that, when your startup is fundraising, you should fine-tune your pitch by approaching less desirable or non-target venture capitalists first.
People have different opinions on this strategy and, here at Kruze, we personally don’t subscribe to it as a technique. However, we do understand some of the rationale behind it, so let’s look at the reasons that people recommend this tactic.
Practicing Your Pitch
When you first start fundraising for your startup you might have, say, five target VCs that you really want to invest in your company. Usually that’s because they have particular characteristics that work well for your business, such as:
- They really fit the brand
- They’ve previously raised significant amounts of money
- They have experience in your industry
- They have a partner who is well-known and experienced
Given the high stakes on securing one of these target VCs, people often recommend you start by pitching to less desirable VCs so you can practice. They suggest that by taking a couple of “test” meetings first you can:
- Work the kinks out of your startup’s fundraising pitch deck
- Get some feedback from professional VCs (even if they’re not your first choice)
- Build your confidence in delivering your VC pitch
The idea is that this will potentially increase your chances of securing your dream VC, since you have polished your pitch with those you’re less interested in impressing.
Practicing on Secondary VCs Could Backfire
Like we mentioned, practicing on less desirable VCs first is recommended by some, but here at Kruze we think there are a number of reasons why this is a bad approach:
- You’re wasting people’s time. If you aren’t serious about taking money from them, it’s unfair to even take meetings with them as that time is precious.
- We think you should treat all investors you are going to meet with equally and with respect. This means you should bring your A game to any pitch meeting. Using a VC as a “rough draft” seems disrespectful.
- Probably the biggest reason is pitching to VCs is unpredictable. It’s incredibly hard to predict which VCs will resonate with what you’re pitching. Who you actually end up working with may be very different than who you thought you’d end up with at the beginning of the process. It’s a bit like finding a needle in a haystack, and you’re most likely going to have to pitch to 25 or more VCs before you find one to invest in your startup, unless you’re a very successful founder already.
Pitch To Your Friends and Pre-Existing Investors
We recommend that you practice your pitch on your friends and your pre-existing investors and associates. Many startups have raised money from a pre-seed or seed fund before you start pitching for Series A. These investors will make time for you since they want to see you succeed!
By practicing your pitch with your associates and your friends, you won’t waste the time of professionals or risk your own reputation by doing so. If you’re not seen as serious when you’re taking these meetings, or people know you’re simply using them for practice, then you could stigmatize yourself. That could affect the opinions of VCs you actually really want on board.
Practice on other people, then bring your A game to pitch to the professionals.
Don’t Waste Opportunities When Fundraising
Finally, we want to remind you to try not to separate and segment your potential VCs too much. At the end of the day, all you need is one to invest, and even that is really hard in the current climate. So don’t sacrifice any opportunities by not taking investor meetings seriously.
If you have any other questions on fundraising, valuations, startup investing, startup accounting or taxes, or taxes, please contact us.