I know VC. 🥷💰
As I work closely with many founders, I noticed almost none of them has any clue on how VCs operate. This includes me, I was clueless about how important it is to understand the way VCs operate to my venture's success.
This will be a love letter to VCs. As now I see, how much tougher it is to pitch a mandate vs explaining a product. How much more difficult it is to manage countless stakeholders vs handful of board members.
Did you know that average VC-startup relationship can last longer than average marriage? Plus, you can get a divorce but cleaning your cap table might be a lengthier, more expensive and much more troublesome experience.
This is why as a founder don't optimize for cash, instead solve for long-lasting relationships which is built on trust, aligned values & incentives.
Don't rush to meet ANY VC. It will backfire.
Most founders are itchy to have their first VC meeting without doing any research. VCs have their strong mandates (e.g., investing in certain industries etc.), they tend to have a certain geography focus (as their LPs want exposure to key markets) and usually they are known for investing at certain stages (early, growth etc.).
Always start with desk research. Crunchbase is perfect for this. In advanced search, see the companies they invested in last couple of years. Do they match your industry, region, stage?
Check the articles on their funds. When did they raise the current fund? Funds run 10 years and there is and overlap between funds (year 7-8 onwards). Beginning of the fund they pick the startups to invest in (ideal time to meet) and year 3 onwards they pick the winners to top up. So, know your ideal time window.
Some founders say, "Hey they usually don't meet companies at early stage like us, but we were lucky to score a meeting." THAT'S NOT GOOD!
Startups are one of the riskiest assets to invest in. VCs solve for minimizing the risk. Data, information and time is best tool to assess the risk. Even though I can get you for cheap at first, it's much riskier for me. Hence, I trade information for relatively lower returns.
As I know, 5 out of 10 of my portfolios will be written off. 1-2 top performers will bring me 30x+ returns and save the fund. These are the dragons I'm going after. I'm technically in the business of chasing dragons.
End of Part
Coming Next
How VCs manage their portfolio companies.
Why time starts ticking the moment you accept the investment.
Why Valuation is a wrong term, and it should be called "Price". (and why shouldn't solve for valuation)
Bonus Stuff
Join us at Fundraising Success Group on LinkedIn where we share more in-depth insights and real startup examples.
