I wrote an extensive article on how to choose the right VC as a founder after a few very direct and intense experiences and significant research. Recently, I have been advising a few founders and one of the most important topic they bring up is raising money. They have to go out and talk to VCs all the time, if they want their startups to grow. Sure, they could build and scale organically, and kudos to the ones that do, but for deep tech, more often than not, you need deep investments.
The first rule of VC meetings as a founder should be: don’t meet everyone who wants to meet with you. It’s the same as reaching out to VCs, not all of them will want to talk to you. And that’s ok.
Let’s say you are in the fortunate position where VCs reach out to you and ask for meetings. This is the way I would structure the due diligence process from the founder/CEO perspective:
- Does the VC have experience investing in the market(s) I’m building for or with customers I want to have?
- Does the VC have successful exists or meaningful M&A activity?
- Does the VC have partners that have specific, hands-on industry knowledge that can benefit my business? (n.b. hands-on can mean operator, but it can mean a good track record as a VC in that space)
- If you are deep tech, does the VC have deep technical expertise – like for NLP, blockchain, biotech, self-driving cars, manufacturing etc.
- Is the person who reached out / who I’m supposed to be meeting the right person in the VC to meet?
- Does that person have deep experience in my space – industry and technology?
- Do they agree to take a 15-30 min phone call to discuss their questions?
- Do they ask the right questions during that call that reflect industry and tech expertise?
If even one of these is a no, then you would be better off passing the call. They might be fishing in the wrong pond or just gathering market intelligence. It won’t likely lead to you getting investment from them.
If this is useful, please share with your founder peers.Helloquence