PS#012: 4-step Guide to Structuring VC Conversations

Adding to our discussion last week around VC Outreach Best Practices, let’s assume our outreach strategy worked and we’ve scheduled a call with an investor.

We need to use this time wisely. 

Time management is a key component of being a venture capitalist. VCs are reviewing hundreds (sometimes thousands!) of startups in a year just to find the handful that are worth an investment. They structure their time, conversations, and relationships to meet this objective.   

Unfortunately, this is where a lot of aspiring investors make their first mistake…

Every interaction is an opportunity to show the VC skill set.

Most aspiring investors will reach out to “learn more” about the role or the day-to-day work. 

This is a really, really bad approach.

In addition to providing little to no value for the investor, you’re also asking them to sacrifice their most valuable resource, time. 

But, putting that aside for a second, you’ve actually missed a better opportunity. This call is a chance for you to show them that you can do the job.  

Investors are often having conversations with one another, sharing deals and trading insights. This is a key part of the job and an effective sourcing strategy.

You can make this a win-win for both you and the investor.

I’m going to walk through how to structure these conversations to… 

(1) show you can do this job, and

(2) provide value to those investors.

Side note: I will be writing a piece on my typical day-to-day / weekly schedule. Stay tuned!

Step #1: introductions, context, and an agenda.

First things, first. Set an agenda.

As with most meetings, having an agenda will help you get the most out of your time.

I recommend the following…

• Introduction (from you) + context for the meeting

• Investor introduction + investment criteria

• Sharing your thesis and deals

• Next steps

Keep your introduction short and concise (remember you only have so much time and some of this should have been shared via email). 

Reiterate the context for your meeting. For example, learning more about their investment criteria and sharing a few deals that you think fit their mandate. 

I try to keep this initial introduction / context setting to about 2-3 minutes.

Step #2: learn about their investment criteria.

Once you’ve given your introduction and set the table for the conversation, you’ll turn the mic over to the investors.

Ask for a quick introduction and their fund’s investment criteria. This will give you some context on the individual investor as well as the type of investments they are targeting.

Make sure to review the firm’s website, investor’s background, and any deals that have been done previously in advance of the call. 

This is critical (hence why I’ve bolded it). 

You want to come to this call prepared. The more prep work you can do on the investor and the firm, the better. This will position you to dive into the nuances of their strategy, investments, etc. rather than asking about items that could have been easily researched online.

When the investor runs through their investment criteria, you’ll want to make sure they cover the list below. If they don’t (and you haven’t found it in your research), feel free to ask for these details…

• Company – sector, stage, and geography

• Investment – fund size, ownership & investment amount, investment pace (per year), reserves, lead or follow, control vs. syndicate, and return profile

• Operating – governance (passive vs. active investors) and value-add approach

 Hopefully, they’re able to run through this in 7-8 minutes, leaving another 20 minutes for the meat of the discussion… 

Step #3: share your relevant thesis & deals.

This is it. The main show.

Based on your research about the firm and the investor, come prepared to discuss your best and most relevant deals.

My recommendation is to try and have three deals lined up. Use the 90-second investment pitch I outlined in issue #006 of Preferred Shares. 

Be prepared to discuss these deals in more detail. If the investor likes the startup, they may ask for an introduction to the founder.

If you have a relationship with the founder and can make this introduction, that’s big. That’s providing REAL value to the investor. They’ll be more likely and interested in speaking with you in the future.

Before you share details or make the introduction, make sure that you’ve cleared sharing information on the company and/or making introductions with the founder.

Step #4: outline next steps.

At the end of the conversation, save 2-3 minutes to outline next steps.

Next steps will include any specific follow-up items as well as the cadence for the relationship going forward. Assuming you’ve been able to provide value to the investor in the form of deal flow and/or your investment thesis, they will likely be more open to connecting in the future.

You now have an opportunity to define the relationship.

For the specific follow-up items, it should go without saying, but make sure you complete these on the timeline discussed. Follow through can really separate you in this industry.

For defining the relationship, there are a few options. 

Initially, I recommend offering to continue to send deals to the investor going forward. This will give them multiple data points for how you operate and build relationships. You can then schedule calls to discuss certain deals/opportunities in more detail.

Once you’ve built a stronger rapport with the investor, you can start taking some “bigger” swings in regards to the relationship, including…

• Discussing whether there are open positions at the firm (full-time, internships, etc.)

• Structuring your own internship (paid or unpaid) to get a seat at the table

Which path you choose will depend on the individual situation.

The second one is a bit more ambiguous and something I will discuss in a future issue.