How to get an associate level VC to be your advocate

I recently gave a talk at one of the Free Lunch Fridays at RTV.  This is a portion of the conversation.

When selling anything, including your company for investment, you have to tailor your pitch to the audience.  Towards that end, it is helpful to understand how selling your company to an associate at a VC firm differs from selling to a partner.

I frequently get the feeling that entrepreneurs forget that VCs are profit-seeking entities, just like the startup.  The main difference is that a venture fund always has to raise another round. We don’t have the luxury of reaching cash flow break even and growing on our own.  Partners live by the success of the firm. Pre-partner level associates are on a quest to become partners, either at their current firm or another. Over the short-term the associate is trying to look good to the partners, over the long-term they are attempting to create a track record of investing in successful companies.

Selling the Associate

Young VCs are trying to become old VCs (in most cases).  The number one way they do that is by establishing a track record of finding and doing good deals.  They only get so many bullets in the chamber and one of them has to hit or enough have to look like they are on target to be able to move up the ladder in their career.  In my experience, the lower the professional ranks in a firm, the more risk averse they are in recommending investments.  In short you need to sell them on the fact that they want to bet a part of their career on the success of your company.

Arming the Associate

When entering into the diligence process entrepreneurs are well served to help the associate on their deal look good. Arm them with the answers to any question they will face when bringing the deal to the partnership, whether they ask them or not. That means you have to be able to tell a simple convincing story and simply address the major obstacles you will face.  But it also means they will need to be able to address fairly detailed questions about your business and why they think you will succeed prior to bringing the deal to the partners meeting. The more knowledge the VC has of the space the more specific the questions will be.   The less they know about the space the less likely they are to become your advocate.  I don’t want to invest or recommend investment in something that I don’t really understand.  It is a good idea to feel out the level of understanding at the table.  When someone pitches me on something I don’t know I will frequently say something like “I am sorry but since I don’t know the space very well you bear the burden of educating me, why don’t we start from there”. Selling the market is frequently step one in selling your company.  If you aren’t sure if you have to sell the market, ask.

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