Last week at TechCrunch Disrupt (recaps coming soon), I spent less time than usual in the green room where staff and speakers work behind the scenes and walked around Moscone Center.
More than 10,000 people passed through the conference hall over three days: I moderated three investor panels and a Q&A, but I must have spoken with at least 30 early-stage founders. I wanted to learn more about what kind of information they’re looking for.
No one I met said they were looking for “thought leadership” or scorching hot takes: Almost everyone wanted actionable advice that would help them fundraise, build and scale.
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If you’d like to know what investors are looking for, how they want to be approached and what they’re most likely to ask, keep reading.
Six out of the seven VCs I surveyed this month included their contact details, so getting in touch with a tech investor is the easy part. The hard part is crafting a story about your startup that’s so convincing, they’ll recognize the value in your idea and wire you some cash.
I can’t help you there. But if you’d like to know what early-stage investors are looking for, how they prefer to be approached and which questions they’re most likely to ask once you’re in the room, keep reading.
Don’t stop here: If you’re in fundraising mode — or know someone who is — these past How to pitch me columns have the answers (and questions) you didn’t know you were looking for. Thanks very much to everyone who participated this month:
Maria Buitron, principal, Piva Capital
Karl Alomar, managing partner, M13
Raja Ghawi, partner, Era Ventures
Anamitra Banerji, managing partner, Afore Capital
Mukaya (Tai) Panich, CIO and CEO, SCB 10X
David Phelps, founder, chairman and CEO; Merlin Ventures and Merlin Cyber
Kavita Gupta, founder and general partner, Delta Blockchain Fund
These answers have been edited for space and clarity.
Maria Buitron, principal, Piva Capital
What kinds of opportunities are you looking for right now?
Our strategy really hasn’t changed since we launched our first fund. We are backing the founders and companies that are transforming industry for the improvement of people and the planet. A big part of that is investing in the decarbonization of industry, but at the same time we think about how technological advancements like 3D printing, robotics, and AI are impacting industry.
We look to invest in companies hitting technical and commercial inflection points, and reimagining how trillion-dollar industries, like manufacturing, food and agriculture, energy and heavy industry, will look in the future.
How do you prefer to be approached: a cold email, a warm intro, or another method?
Warm intros are always better because there is also more context. I also like to meet people in person, so meeting at conferences or events is a good way to learn more about not only companies but also the founders and teams behind them.
If you’re comfortable doing so, please share your contact info.
What made you say yes to the last company you invested in?
Our latest investment is led by an awesome founder with a lot of experience in the space she is trying to disrupt. Not only does she have a very unique technology and a great team, but during the pitch she clearly articulated what she had learned from previous attempts at solving this same problem, and why being laser-focused on customer’s needs was key for this company to succeed.
We ended up deciding to lead this round after having several customer conversations that validated this. If the product and solution are that good, you want to hear it from real customers.
When is it too early to start looking for investors?
I like meeting companies early because it is very powerful for founders to say, “This is what I told you I would do in this time, and that is exactly what I did,” when we reconnect again.
When you are ready to start fundraising, you want to make sure you know how much capital you’ll need and what are the main milestones. The days of hand-waving the size of your next round are over, so as soon as you know that, the sooner you can have conversations with investors.
Besides product-market fit or revenue, what are three things a team needs to show you before you sign a term sheet?
A clear understanding of how much capital is needed to scale: What other sources of capital, besides venture dollars, will you be looking for?
A clear articulation of the risks that the business they are building will face — do they think there are execution, market, or regulatory risks, and how do they think about mitigating them?
A clear communication of the big vision for the company — we are investing in huge markets with big problems. How is this company going to look in five, 10, 20 years?
In September 2023, what are the top questions founders need to ask investors?
Having an investor be a board member means being a partner for the next five to 10 years; you want to make sure you know how they work with founders when things go well but also when things don’t go well. Good VCs will be happy to introduce you to some of their portfolio founders so you can hear directly from them.
Also, make sure you understand the fund’s reserves strategy — how much of their capital is reserved for follow-on investments, do they typically follow on, and how do they assess follow-on opportunities?
Can you describe one traditional pitch tactic that no longer works but is still a common practice?
Doing a full pitch and asking investors to save their questions until the end. As a founder, you want to make sure you have an engaged set of investors hearing your pitch. Lots of high-quality questions may mess up the flow of your slides, but will make sure that the VCs understand your business, and it will help you understand how they think and what they’re looking for.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
Short memos often lack real metrics and information to understand why this company is different. If you are sending ahead of time, I find that sending complete decks is a better strategy since VCs will have the time to review and show up prepared with questions.
What are you reading/watching/listening to right now?
While I still like the VC podcasts, I realized I needed a little break from my 100% VC content. I’m alternating between “Nuestra Parte de Noche” (Our Share of Night), which is a psychological thriller set in Argentina in the ’70s and ’80s, and re-reading “Why We Sleep” by Matthew Walker, which I highly recommend.
Karl Alomar, managing partner, M13
What kinds of opportunities are you looking for right now?
I would initially filter opportunities by stage and category. From a stage standpoint, although seed investments can be fruitful and I have made a number of these, my preference is to look for companies closer to their Series A, with validated product-market fit and some early traction in hand.
My general categories of focus tend to be around fintech, web3, productivity tools/SaaS and AI tooling and infrastructure. Having said that, I am also intrigued by businesses outside this scope that generally disrupt antiquated categories and markets although I do generally steer clear of true enterprise businesses or physical consumer product offerings.
How do you prefer to be approached: a cold email, a warm intro, or another method?
Let me apologize in advance: As an investor, I get a lot of inbound email, so it is sometimes difficult to respond to all in a timely manner. The best way to get a hold of me or any investor is through your network with a warm intro.
If there is a way to secure an introduction or some point of reference, it makes it much easier for an investor to filter you and will likely drive a far more efficient response. If the warm intro is not an option, then feel free to email directly, as LinkedIn has a lot of noise and is not often noticed.
If you’re comfortable doing so, please share your contact info.
You can always email me at [email protected]
What made you say yes to the last company you invested in?
The biggest driver of decisions for me will generally be the founders and my belief that they can truly build a great business. The last company I invested in combined an incredibly strong founder/CEO who clearly was able to break through walls and make things happen within a company that has clear product-market fit and a category that demonstrates strong potential demand.
However, the key was that the founder possessed a unique ability to secure incredibly preferential terms on all the partnerships he brought to the table, and I could truly see him building the business into a very large outcome. Since investment, the company has already doubled in size and is one of the leading performers in our portfolio.
When is it too early to start looking for investors?
It is never too early to look for investors; however, investors do come in all shapes and sizes. Although angels could support you with an idea, to get to institutional capital, more is needed.
For a seed investment, as a general rule of thumb, I would suggest you have a fully fleshed out plan and economic model with a minimal viable test in hand to validate that there is market interest in what you are offering.
However, for Series A, you need a lot more validation: Ideally you would have proven product-market fit and demonstrated the sales motions that could be repeated and scaled within a reasonable customer acquisition cost. Ultimately in all scenarios, you should come with a clear vision and good understanding of your market and the capacity for scale in your business.
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
There are many variables in assessing each deal that are very unique, but if I were to narrow it down to three core concepts, here is where I would land:
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Business economics: We need to see that the business can scale in a healthy manner and that the economics make sense.
Meaningful target audience: The business target should allow for significant growth and as a result a strong long-term potential enterprise value.
Strong founders/leadership: Most importantly, we will assess the quality of the leaders themselves and assess their ability to inspire with a vision and operate effectively.
In September 2023, what are the top questions founders need to ask investors?
This is a great question and so incredibly important.