I met with an investor, what happens next?

Posted on Sep 20, 2009 | 75 comments


This is part of my ongoing series, “Pitching a VC.”  Getting a meeting with a prominent angel or VC is difficult enough.  Some advice on how to do that was covered in this link – Getting Access to a VC.  This post covers the day after.  I spoke about the topic on Fox Business News yesterday in a great session with TechCrunch50 winner RedBeacon and will post it along with my other VC Videos when Fox puts it on their website.

The Day After (the waiting game begins)

So you just had an investor meeting.  It sounded like they really liked you.  The promised to follow up with: calls, using your product, talking to customers or “noodle on things.”  Will they?

OK, if I’m going to be honest with you then you need to promise not to shoot the messenger.  Despite best intentions they probably won’t follow up on their actions. And unless you just won the TechCrunch50 (e.g. you’re hot) it probably won’t go very quickly (unless we return to the boom days of VC, which I suspect won’t happen again soon).

Remember that most fund raising takes time.  It’s about building long-term relationships and showing traction over time.  If you haven’t read how to build VC relationships and demonstrate traction make sure to read it.

Why don’t VC’s follow up? Because VC’s (not unlike yourself) are tremendously busy.  The partner you saw is probably sitting on 5-6 boards which means he or she will be busy helping existing portfolio companies.  They probably have 3-4 deals that are further along in their pipeline of deals they are considering (e.g. ahead of thinking about you).  They have probably seen 4-5 new companies this week minimum.  And they have responsibilities for helping to manage their fund.  Plus, now they need to Tweet, use Facebook, attend conferences and keep a blog! ;-)  Not to mention what happens in years where they also need to raise a new fund.

Let’s be honest.  This is not unlike a major biz dev deal you’re trying to sign or a big sales campaign into the VP of a major company.  I like to tell entrepreneurs to treat it like a sales campaign.  EXACTLY like a sales campaign.  You would never go see an important executive at a customer and then sit around and wait for them to realize how great you are.

As a result, the ball is actually in your court.  Maybe it shouldn’t be?  But the reality is that it is.  So don’t expect an unprompted email or phone call next week.  Don’t be surprised if your logs don’t show that the partner has been using your product.  If any of this happens it’s a bonus (but still doesn’t mean that they’ll follow up. They just had some time and found your product interesting).

I am really surprised how many entrepreneurs pitch me and then I never hear from them again.  I guess they assume that since I didn’t email or call I must not be interested.  This isn’t always the case.  Anyway, the video from my interview is right below and my guide is after the jump.

So how to proceed?  Read the following as a guide

ENTREPRENEUR NEXT STEPS

radar21. Stay on the radar – You need to find a very polite way to persistently be on the top of the radar screen of your VC.  Start with a very short thank you email the day after your pitch.  If any actions were agreed this should be in the email.  If they said they’d use the product it should have the password.  If they wanted to talk to people this should have the contact details.  If any junior people attended send them separate emails and help them get up to speed on the product.  It is much easier to follow up by calling the junior staff (again, just as you would in a sales campaign).

2. Show a sense of momentum – After a week or two has passed and you haven’t heard back it’s time for step 2.  A polite follow up email saying, “just wanted to follow up with a quick summary of some exciting news.”  Yes, I know only 2 weeks has passed.  That’s why in your original meeting you should hold back some news that you have so you can bring it up later.  Sinister?  Not really – just a good sales tactic.  You’re just trying to stay on the radar screen.  I suggest in your email you say, “I know you’re really busy so I’ll make sure to check back in a week or so.”

3.  Find a way to help the investor – Not everybody has the capacity to do this but if you can you should try.  Did anything come up in the meeting where you think the investor could use your help?  Did you mention an executive contact that they’d like to meet?  Do you know a “hot” company that you think would like an intro (if so, make sure it’s one that’s not currently fund raising ;-) ) Do you have access to an event that’s coming up and you want to invite the investor?  Whatever.  Doing a “not over the top” favor is a good way to build rapport.

4. A reason to reengage – By now if you’re in a normal VC or angel process 4-6 weeks might have passed.  If you know that the best VC processes can take 4-6 months you won’t feel the time pressure.  If you left funding to the last minute you’ll need to be more aggressive, which is a shame.  But your next step is to find a reason that the VC needs to see you again.  This could be a major new release of the product that you’d “love to show the VC because he’ll find it interesting” and you promise to only stay 20-30 minutes.  Or maybe you had a major customer win that you’d like to walk them through.  Or a major shift in strategy.  Whatever.  You need to push the next meeting.

5. Multiple endorsements / touch points – The same strategy that works to get intro’s to people works to get momentum from people.  They need to hear about you from multiple touch points.  It needs to be masterfully orchestrated by you but very subtle.  You need to find out who influences the partner.  Who knows them well or at least somebody that they see on a regular basis.  It needs to be somebody you know and trust.

In a perfect world you say, “I met a few weeks ago with Joe Partner at Big VC Co.  He seemed to be interested.  If you happen to see him I’d really be grateful if you would mention how much you like our product / believe in our company / that you knew me well when we worked at Yahoo! (or whatever is appropriate).  I want to be subtle about it so if you talk with the VC please don’t over play it.”  The more people who mention you the better.

prom6. A sense of urgency - This is the critical bit.  I call it the “prom conundrum.”  Let’s face it – everything we do now is some derivative of what we did in high school.  Four guys are thinking of asking you to the prom.  They don’t because they’re also thinking of asking Susie.  But if they hear that somebody else is seriously thinking of asking you to the prom – BOOM – you get asked.  I wish it weren’t so.  It is.  That’s human nature.  (reminder: don’t shoot the messenger – I’m just telling you how it is).

So how do you create urgency?  First, you do need to create multiple interested parties.  You can’t fake it.  Then see point 5 above.  You need to find a way to get a whisper campaign going that somebody else is thinking about asking you to the prom.  If all else fails you give the VC a call with a very subtle and polite message, “Just wanted to keep you updated on our situation.  We’re getting some strong interest from a couple of firms.  We don’t have a term sheet yet but seem close.  We really liked your firm and just wanted to get a sense on what else you need from me to help your process.”

7. Extra Credit Tip - I’m going to get pounded for saying this so I’m making it optional (but it is a very smart strategy).  Do the VC’s work for them.  What, what?  Yes, I said it correctly.  They’re having a tough time understand how big you can be?  Do the market sizing analysis for them and send it.  They’re worried about competitors? Do a 5-page PowerPoint competitive assessment.  They said they’d call references but haven’t?  Ask your senior customer client to proactively call them.  They aren’t sure about your business model?  Come in and walk the associate through the details.  VC’s (like you) are busy.  The more you make their life easier the quicker you get to yes.

Guidelines for following up

1. Be subtle – All this said, there is such a delicate balance between polite persistence and being a pest.  You need to sail very closely to the line of acceptability without ever crossing it.  You need to show chutzpah without being annoying.  Smile when you’re asking for more meetings and say, “I’m really sorry to push you but I guess you’d want to invest in somebody who pushes customers  bit, too?”  It is not something I can ever teach somebody – it’s like art – you know it when you see it.  People cross the line often.  It’s not pretty.

2. Be concise – Unlike this post you need to be very brief in all communications and meetings.  No VC reads long emails – no time.  If you ask for (or they offer) a favor – ask for 1 and only 1 for now.  I sometimes get requests for 4 things at once.  In this case I’m like a deer in the headlights – I don’t know where to start – so I usually don’t.  When I get one request – I do my best to help.  If you ask for a follow-on phone call or meeting promise to be brief and deliver on that promise.

3. Be persistent – Can’t emphasize this enough.  Don’t be offended that they didn’t respond via email.  Senior people get busy, bogged down and behind.  Send a few times.  I covered the topic on the post I emailed a VC but never heard back.

4. Use multiple channels - My email is always overloaded.  If I don’t respond I promise you that I’m not ignoring you.  If I’m not interested I’ll tell you.  I am just overwhelmed.  If we’re connected on LinkedIn or Facebook – try a short ping there.  If the VC uses Twitter regularly then this is a perfect place to connect.  I love it because it’s restricted to 140 characters so you have to be concise!  But avoid anything confidential unless it’s a DM.

5. Let time pass – If you email me on Tuesday and remind me on Thursday (which happens) you’ve crossed the line.  If you’re feeling pressured because you’re nearly out of cash – then you started the process too late.  That’s not my fault.  Desperation never sells well.

6. Be gracious – Be extra courteous in all communications.  A little good graces goes a long, long way.  Be apologetic of taking up time.  Be thankful for work put in.  I know it’s their job, but it makes a difference so being nice never hurts.

7. Accept “no” for an answer – I can’t emphasize this enough, if you do get a “no” then politely move on.  It’s OK to ask if they know a VC that might be a better fit and ask for a VC intro.

If you think they’re telling you “no” but don’t know for sure I would recommend the following email, “Dear VC, I get the sense that you guys are not interested in investing in my company at this stage.  I appreciate all of the time you put in and hope to convince you next time around.  We are talking to other parties – it would be very helpful if you could confirm that you’re no longer interested just to help me better manage my time.”

Voila.  Make it easy for them to say “no.”  Better that you at least know.  Otherwise they’re not likely to tell you.

  • http://twitter.com/CitySourced CitySourced

    Keen insights mark, thanks for sharing. C'mon!

  • gaganbiyani

    Mark,

    Great meeting you at TC50, and we're definitely trying to tackle some of the concerns you brought up during the conference.

    Furthermore, I loved the post. I've been talking to VC's a lot lately (primarily for advice, though we'll be looking for fundraising relatively soon), and made many of the mistakes you outlined here. Thanks for the advice; I'll implement it and let you know how it goes.

    Also, still half-way through the deer-hunter post but wanted to add: I currently work for Accenture Strategy consulting, and it's interesting to hear your perspective on being a consultant.

    Thanks for the advice + hard work on the blog.

    Gagan

  • gaganbiyani

    Mark,

    Great meeting you at TC50, and we're definitely trying to tackle some of the concerns you brought up during the conference.

    Furthermore, I loved the post. I've been talking to VC's a lot lately (primarily for advice, though we'll be looking for fundraising relatively soon), and made many of the mistakes you outlined here. Thanks for the advice; I'll implement it and let you know how it goes.

    Also, still half-way through the deer-hunter post but wanted to add: I currently work for Accenture Strategy consulting, and it's interesting to hear your perspective on being a consultant.

    Thanks for the advice + hard work on the blog.

    Gagan

  • http://bothsidesofthetable.com msuster

    Thanks, Gagan. I, too, worked for Accenture Strategy. I'm still cynical. You either do or your sitting on the sidelines. If you've never played football it's hard to coach or give armchair advice. No doubt you feel qualified given the countless Sundays you've spent watching the game and the books you've read. But … anyway, stay in touch.

  • http://infiniteroi.com/ Paul Mobley

    Great resource. Thanks for the reminders.

  • http://bothsidesofthetable.com msuster

    Thanks, Gagan. I, too, worked for Accenture Strategy. I'm still cynical. You either do or your sitting on the sidelines. If you've never played football it's hard to coach or give armchair advice. No doubt you feel qualified given the countless Sundays you've spent watching the game and the books you've read. But … anyway, stay in touch.

  • http://infiniteroi.com/ Paul Mobley

    Great resource. Thanks for the reminders.

  • adityavempaty

    Mark, At what point is there a line between being a pest or being presistant? As just one call or one email could push the VC over the edge to the point where you maybe doing much more harm than good.

  • adityavempaty

    Mark, At what point is there a line between being a pest or being presistant? As just one call or one email could push the VC over the edge to the point where you maybe doing much more harm than good.

  • http://www.gogopin.com/ Ray

    I'd love to know the answer's for Aditayavempaty's question too. For my case, numerous times our company was told to wait and we could wait just fine but then when we wanted to get things started again, we were not fully sure if our email or call could push the VC over the edge or not especially when it is repeated few times.

  • http://bothsidesofthetable.com msuster

    Aditya, unfortunately as I said, “it's a bit like art – you know it when you see it.” That said, some guidelines. 1. Create pleasant “excuses” to contact your VC such as intro'ing them to entrepreneurs. Find out which events they'll be out and create “fortuitous” reasons that you see them. Send occasional,short emails with updates on your progress but not immediately asking for a meeting or follow up. And try to find a way to loop them on the phone. VC's are sinking in email. Clever people find alternate ways to get to them. If you're a really charming person you'll likely get away with being a bit “cheeky” as we used to say in the UK. If you know yourself well and you know that you're not Mr. Suave then I recommend one of the fortuitous approaches. Good luck. Oh, and one more rule. In life I always recommend taking more chances, not less. Sometimes that means you force some “no's” but I'd rather see that than long drawn-out maybes. It's what i look for in entrepreneurs.

  • http://www.gogopin.com/ Ray

    I'd love to know the answer's for Aditayavempaty's question too. For my case, numerous times our company was told to wait and we could wait just fine but then when we wanted to get things started again, we were not fully sure if our email or call could push the VC over the edge or not especially when it is repeated few times.

  • http://bothsidesofthetable.com msuster

    Aditya, unfortunately as I said, “it's a bit like art – you know it when you see it.” That said, some guidelines. 1. Create pleasant “excuses” to contact your VC such as intro'ing them to entrepreneurs. Find out which events they'll be out and create “fortuitous” reasons that you see them. Send occasional,short emails with updates on your progress but not immediately asking for a meeting or follow up. And try to find a way to loop them on the phone. VC's are sinking in email. Clever people find alternate ways to get to them. If you're a really charming person you'll likely get away with being a bit “cheeky” as we used to say in the UK. If you know yourself well and you know that you're not Mr. Suave then I recommend one of the fortuitous approaches. Good luck. Oh, and one more rule. In life I always recommend taking more chances, not less. Sometimes that means you force some “no's” but I'd rather see that than long drawn-out maybes. It's what i look for in entrepreneurs.

  • Laurel

    My husdband found an investor and while awaiting the funds, the investor told him to get all the work going, when all the work was done, and after numerous calls and him saying hes still in and not backing out, he said, no, hes not financing him, now we are one hundred thousand into it, and are devasted,what should we do?

  • http://bothsidesofthetable.com msuster

    Oh, boy. Sorry to hear that. That really sucks. Not that it matters now, but did you have a term sheet? In the future be careful about over investing until you have a term sheet. Most quality VCs will tell you where you stand once you have a term sheet (or earlier if you push hard). I don't know that stats but I have to believe 80% of early-stage deals that get to term sheet close. Lower for later stage deals because more pops out in due diligence.

    As for “what now?” Depends on your financial resources. If you're completely tapped then slash costs quickly to exist on low burn. Try to find some angel, seed or friends & family money quickly. May be hard. Impossible to advise without more details.

    If you have more time it is best to get out to other professional investors quickly. Some other thoughts:
    - get a great lawyer involved. Not for the past but for the future. They can tell you your viability of funding and who to approach. Depends where you live. For simplicity I'll tell you that DLA Piper has a great national practice and a Venture Pipeline group that helps companies.
    - get a trusted investor to give you an honest assessment of your business – no holds barred. If the feedback is bad (and comes from multiple sources) then be very careful about spending going forward. If the feedback is good you obviously have more options.

    Good luck to you. I hate to hear stories like that.

  • Laurel

    My husdband found an investor and while awaiting the funds, the investor told him to get all the work going, when all the work was done, and after numerous calls and him saying hes still in and not backing out, he said, no, hes not financing him, now we are one hundred thousand into it, and are devasted,what should we do?

  • http://bothsidesofthetable.com msuster

    Oh, boy. Sorry to hear that. That really sucks. Not that it matters now, but did you have a term sheet? In the future be careful about over investing until you have a term sheet. Most quality VCs will tell you where you stand once you have a term sheet (or earlier if you push hard). I don't know that stats but I have to believe 80% of early-stage deals that get to term sheet close. Lower for later stage deals because more pops out in due diligence.

    As for “what now?” Depends on your financial resources. If you're completely tapped then slash costs quickly to exist on low burn. Try to find some angel, seed or friends & family money quickly. May be hard. Impossible to advise without more details.

    If you have more time it is best to get out to other professional investors quickly. Some other thoughts:
    - get a great lawyer involved. Not for the past but for the future. They can tell you your viability of funding and who to approach. Depends where you live. For simplicity I'll tell you that DLA Piper has a great national practice and a Venture Pipeline group that helps companies.
    - get a trusted investor to give you an honest assessment of your business – no holds barred. If the feedback is bad (and comes from multiple sources) then be very careful about spending going forward. If the feedback is good you obviously have more options.

    Good luck to you. I hate to hear stories like that.

  • PK

    Question: working on a new business project, who on earth has the time with this seeming 24/7 marketing tactics and scheeming? Sounds like a full time job! I know some great people working on really interesting projects and they barely have time off to meet friends. To spend this much time and effort just to give people with funds the chance to earn huge chunks of profits on someone else's hard labor?
    Some people are inventors and developers, not the 'Paris Hilton' of self-promotion for investment networking. Perhaps this is why so few investment deals actually end in a pay off… Maybe they need to focus on trying to see the potentials more than looking for people who are experts in self-promotion.

  • PK

    Exactly 'where' are all these VC's you can actually call up and keep updated with, or get advice from? I find they are mainly shielded by a small receptionist who constantly avoids you meeting or getting in touch with the VC no matter how often you try.

  • PK

    Question: working on a new business project, who on earth has the time with this seeming 24/7 marketing tactics and scheeming? Sounds like a full time job! I know some great people working on really interesting projects and they barely have time off to meet friends. To spend this much time and effort just to give people with funds the chance to earn huge chunks of profits on someone else's hard labor?
    Some people are inventors and developers, not the 'Paris Hilton' of self-promotion for investment networking. Perhaps this is why so few investment deals actually end in a pay off… Maybe they need to focus on trying to see the potentials more than looking for people who are experts in self-promotion.

  • PK

    Exactly 'where' are all these VC's you can actually call up and keep updated with, or get advice from? I find they are mainly shielded by a small receptionist who constantly avoids you meeting or getting in touch with the VC no matter how often you try.

  • http://bothsidesofthetable.com msuster

    I respectfully disagree with you. Great product builders to not always make great company builders. Great company builders know how to get press, land customers, hire senior people, raise capital and all the myriad of things required to be a well rounded individuals. All of these things are packaged together in the fund raising process and if you don't have what it takes to get through this process chances are you don't have what it takes to build a huge company. This is not always the case but it is a good general indicator. Harsh, but true.

  • http://bothsidesofthetable.com msuster

    I respectfully disagree with you. Great product builders to not always make great company builders. Great company builders know how to get press, land customers, hire senior people, raise capital and all the myriad of things required to be a well rounded individuals. All of these things are packaged together in the fund raising process and if you don't have what it takes to get through this process chances are you don't have what it takes to build a huge company. This is not always the case but it is a good general indicator. Harsh, but true.

  • PK

    I do understand the cautions and I do agree that one person may not fill all shoes. Personal effort certainly tells of the capacity of a person but not everyone are attention hawks. I guess one would have to value how a person reasons if they are capable more than an actual track record. Now in the recession, where is the skill level of all these A-class CEO's who are forced to file Ch 11 for their huge corporations? So many companies have folded even with the best CEO's in the helm demonstrating they can't handle crisis no matter how great their CV is.
    Look at some of the biggest brands like Microsoft, Apple, Oracle, Intel, HP, Dell, IBM, GE, Wall Mart, Starbucks, and Disney. All were run by founders with no prior CEO experience and probably very little track record of their capacity. Even Google and Yahoo got to the execution stage of a proven model before a professional CEOs joined. A lot can be achieved hiring the right employees, as long as the executive has some level of good common sense.
    Thanks for the input, by the way.

  • PK

    I do understand the cautions and I do agree that one person may not fill all shoes. Personal effort certainly tells of the capacity of a person but not everyone are attention hawks. I guess one would have to value how a person reasons if they are capable more than an actual track record. Now in the recession, where is the skill level of all these A-class CEO's who are forced to file Ch 11 for their huge corporations? So many companies have folded even with the best CEO's in the helm demonstrating they can't handle crisis no matter how great their CV is.
    Look at some of the biggest brands like Microsoft, Apple, Oracle, Intel, HP, Dell, IBM, GE, Wall Mart, Starbucks, and Disney. All were run by founders with no prior CEO experience and probably very little track record of their capacity. Even Google and Yahoo got to the execution stage of a proven model before a professional CEOs joined. A lot can be achieved hiring the right employees, as long as the executive has some level of good common sense.
    Thanks for the input, by the way.

  • PK

    I do understand the cautions and I do agree that one person may not fill all shoes. Personal effort certainly tells of the capacity of a person but not everyone are attention hawks. I guess one would have to value how a person reasons if they are capable more than an actual track record. Now in the recession, where is the skill level of all these A-class CEO's who are forced to file Ch 11 for their huge corporations? So many companies have folded even with the best CEO's in the helm demonstrating they can't handle crisis no matter how great their CV is.
    Look at some of the biggest brands like Microsoft, Apple, Oracle, Intel, HP, Dell, IBM, GE, Wall Mart, Starbucks, and Disney. All were run by founders with no prior CEO experience and probably very little track record of their capacity. Even Google and Yahoo got to the execution stage of a proven model before a professional CEOs joined. A lot can be achieved hiring the right employees, as long as the executive has some level of good common sense.
    Thanks for the input, by the way.

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