Useful tips from investors
Once, one venture capitalist from a large European fund got tired of each time encountering the same mistakes and shortcomings of entrepreneurs that they make in the process of communicating with investors. Having set himself the goal of reducing the number of awkward moments in the process of communicating with startups, he described with short theses the main points that are often incomprehensible to a startup, especially to an inexperienced person. The result was a kind of collection of useful tips, the translation of which I submit to your attention.
Introductory letter: the investor's first impression of you.
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• The letter must be addressed to a specific investor, and must be addressed personally to him. Depersonalization of the letter = low priority of the application.
• Do not send email if you do not have all the necessary documents and materials for the subsequent stages.
• To send “general” letters to hundreds of investors' addresses is a hopeless occupation.
• When sending a letter to another investor, do not use “Copy-> Paste”.
• The letter must be written correctly. Use spell checkers. Well, if the case is really bad, then the dictionary.
• VCs do not sign the NDA . No, and your case is no exception.
• The smaller the attachment to the letter - the better it is.
• Avoid unnecessary details and nuances.
Phone call: achievement, but not yet success.
• Do not refuse to discuss any issues over the phone.
• Dispute after the words “We are not interested” will not cause interest.
• In case of refusal, do not be afraid to ask you to recommend a more suitable foundation.
• “We are in contact with other investors” - be careful when using this phrase.
• Be prepared for key questions (“How much?”).
Due diligence is a mutual process.
• Find out what investments this fund / investor recently made.
• Learn more about companies that have received investments from this fund / investor.
• Contact entrepreneurs who have received investments from the fund and those who have been refused.
Planning time.
• Consider it only half the time you were given.
• Be sure to understand how much your buddies value time.
• If you do not have enough time - ask what to focus on.
• Send all necessary materials a few days before the meeting.
Who should attend?
• You can take one or two team members with you.
• It is preferable to give a presentation alone than with a silent partner.
Investors should receive answers to these questions first of all:
• Who you are?
o What makes your project interesting for an investor?
• Why is your idea promising?
o How big is the scale of the idea?
• How do you plan to implement the idea?
o What is unique about the approach?
o Do you have the necessary knowledge?
o Do you have your own know-how and technology?
• Who else is working (or going to work) on similar ideas?
o What are your benefits?
• When will you have the first beta version?
o First shareware?
o First buyer?
o First release?
• How much will our participation cost?
o How much money do you want to get?
The most frequently pronounced words that become last:
• “We have not yet decided which of us will be the CEO”.
• “The first thing we will do is initiate contacts with potential buyers.”
• “This problem is serious - all analysts talk about it.”
• “We have no competitors”.
• “We need about 500 thousand to about 5 million.”
What entrepreneurs usually forget to do before meeting with investors:
• Talk to potential customers.
o Instead of “Are you interested in this?” ask “How much are you willing to pay for it?”.
o Get written recommendations / opinions / applications from potential clients.
o Ask permission to publish these recommendations / opinions / applications.
• Make an in-depth analysis of the competition.
o Who can be a competitor in the future?
o What technologies / trends intersect with your ideas?
• Give examples. It would be nice to give examples of existing companies on the market that have already implemented similar ones:
o Business model.
o Sales model.
o The exit points of the investor from the project.
What entrepreneurs usually do (and should not):
• Blindly trust analysts.
o VC do not trust analysts.
o Analysts do not believe themselves.
o Analysts are constantly mistaken in their forecasts.
• Distort financial performance
o “This indicator is too low - the investor will not be interested.”
o “This indicator is too high - the investor will not believe.”
o “This term is too short - the investor will think that we are profane.”
o “This period is too long - the investor does not want to get involved in a long adventure.”
5 things that investors love:
• Specialists in the relevant field.
• This startup is not your first.
• “Nice guy” in the team.
• An expert in the industry, including as a consultant / mentor.
• Having a potential customer.
5 things that investors do not like:
• People who “know everything”.
• 8 founders with the same shares.
• “We have an offer from another investor”.
• Offensive reviews about anyone / anything.
• People who are not willing to give up the position of CEO .
This topic is my free translation of a document written by Assaf Frenkel, Gemini Israel Funds.
PS PPNH - do not scold strongly :)
PPS PPNH = First Post On Habré.
Stage 1: Email
Introductory letter: the investor's first impression of you.
')
• The letter must be addressed to a specific investor, and must be addressed personally to him. Depersonalization of the letter = low priority of the application.
• Do not send email if you do not have all the necessary documents and materials for the subsequent stages.
• To send “general” letters to hundreds of investors' addresses is a hopeless occupation.
• When sending a letter to another investor, do not use “Copy-> Paste”.
• The letter must be written correctly. Use spell checkers. Well, if the case is really bad, then the dictionary.
• VCs do not sign the NDA . No, and your case is no exception.
• The smaller the attachment to the letter - the better it is.
• Avoid unnecessary details and nuances.
Stage 2: Phone Call from Investor
Phone call: achievement, but not yet success.
• Do not refuse to discuss any issues over the phone.
• Dispute after the words “We are not interested” will not cause interest.
• In case of refusal, do not be afraid to ask you to recommend a more suitable foundation.
• “We are in contact with other investors” - be careful when using this phrase.
• Be prepared for key questions (“How much?”).
Due diligence is a mutual process.
• Find out what investments this fund / investor recently made.
• Learn more about companies that have received investments from this fund / investor.
• Contact entrepreneurs who have received investments from the fund and those who have been refused.
Stage 3: Personal meeting
Planning time.
• Consider it only half the time you were given.
• Be sure to understand how much your buddies value time.
• If you do not have enough time - ask what to focus on.
• Send all necessary materials a few days before the meeting.
Who should attend?
• You can take one or two team members with you.
• It is preferable to give a presentation alone than with a silent partner.
Investors should receive answers to these questions first of all:
• Who you are?
o What makes your project interesting for an investor?
• Why is your idea promising?
o How big is the scale of the idea?
• How do you plan to implement the idea?
o What is unique about the approach?
o Do you have the necessary knowledge?
o Do you have your own know-how and technology?
• Who else is working (or going to work) on similar ideas?
o What are your benefits?
• When will you have the first beta version?
o First shareware?
o First buyer?
o First release?
• How much will our participation cost?
o How much money do you want to get?
The most frequently pronounced words that become last:
• “We have not yet decided which of us will be the CEO”.
• “The first thing we will do is initiate contacts with potential buyers.”
• “This problem is serious - all analysts talk about it.”
• “We have no competitors”.
• “We need about 500 thousand to about 5 million.”
The purpose of the first meeting is not to sell, but to generate interest.
What entrepreneurs usually forget to do before meeting with investors:
• Talk to potential customers.
o Instead of “Are you interested in this?” ask “How much are you willing to pay for it?”.
o Get written recommendations / opinions / applications from potential clients.
o Ask permission to publish these recommendations / opinions / applications.
• Make an in-depth analysis of the competition.
o Who can be a competitor in the future?
o What technologies / trends intersect with your ideas?
• Give examples. It would be nice to give examples of existing companies on the market that have already implemented similar ones:
o Business model.
o Sales model.
o The exit points of the investor from the project.
What entrepreneurs usually do (and should not):
• Blindly trust analysts.
o VC do not trust analysts.
o Analysts do not believe themselves.
o Analysts are constantly mistaken in their forecasts.
• Distort financial performance
o “This indicator is too low - the investor will not be interested.”
o “This indicator is too high - the investor will not believe.”
o “This term is too short - the investor will think that we are profane.”
o “This period is too long - the investor does not want to get involved in a long adventure.”
5 things that investors love:
• Specialists in the relevant field.
• This startup is not your first.
• “Nice guy” in the team.
• An expert in the industry, including as a consultant / mentor.
• Having a potential customer.
5 things that investors do not like:
• People who “know everything”.
• 8 founders with the same shares.
• “We have an offer from another investor”.
• Offensive reviews about anyone / anything.
• People who are not willing to give up the position of CEO .
This topic is my free translation of a document written by Assaf Frenkel, Gemini Israel Funds.
PS PPNH - do not scold strongly :)
PPS PPNH = First Post On Habré.
Source: https://habr.com/ru/post/36923/
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