Fundraising is badly misunderstood | Data Driven Investor

Understand perception

I will get into a sensible point but an essential one. VCs have a mental image of what a great founding team looks like; it all starts with the team. No one will admit it in our politically correct world, as the stand is to stay completely open-minded. However, that is not true; it’s impossible to be completely objective, our past, our experiences, our culture molds our convictions.

Understand VCs reasoning

We can argue that VCs’ decision-making is a black box; however, we know what VCs want to hear.

Do not send a cold email

VCs value referred opportunities. A cold email won’t help much it sends the wrong signal. It tells the VC that the startup does not know anyone in the ecosystem capable of making a connection, or worse, that no-one wants to make a connection. So either the startup is isolated thus in the wrong dynamic, or not good enough for someone to open access to his/her network.

Don’t sell blindly hoping something will stick

Most founders see the VC meeting as a sales exercise. The founders need to convince the VC of the opportunity. I think it’s almost (not entirely :-)) always the other way around. There are tons of VCs with money to invest; there is only one startup like yours. So instead of begging for money, try to assess if you want to work with the VC. Ask them questions, understand if you see your team working with them. Think about a doctor. When you go to a doctor, the doctor does not show you all medicine available to choose from. The doctor will try to get a diagnosis first and then propose the right medication. You are a doctor, qualify what the VC wants, and only if you have the medicine, pitch it, otherwise walk away, do not waste anybody’s time.

Finally, qualify your target

An investor is not someone with a large wallet who will invest as soon as he/she sees something amazing. Investment funds are constructed based upon investment models. Some will only invest in AI; others are generic but only do early stage, and so on. Do your homework and never dream that the VC will bend the rules and consider investing because you are so special. VCs have a responsibility vis a vis their Limited Partners (the one that gave the money to invest). They also have rules to follow.

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