How do I prepare to meet VCs?

27th Oct 2011
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Sandhya

Many of my entrepreneur friends put off meeting VCs or potential sources of money because they are not sure how prepared they are. They are guarded (and rightly so), but to win the game, you have to first play.

So you had an idea and you got your friends to start working on it with you. You incorporated a company and now you have customers. Paying customers. Congratulations! There are many questions you need to answer – right from how much money do you need, when to raise it and whom to raise it from. But this article addresses a smaller problem. What do you need to know to set up your first meeting?

Turns out there are three simple things that you need to be prepared with. Consider this a cheat-sheet.

  1. Know your idea IN and OUT
  2. Think SCALE. How big can everything get?
  3. Ask them all the tough questions

Know your idea IN and OUT

Clarity is key. Be very precise about what the scope and value proposition of your business is. You can either do one special thing everyone will love or many special things some people will like. Can’t please them all.

The value of the idea itself is not much when compared to your team’s ability to execute on it. So focus on explaining how you can implement your idea faster and smarter and cheaper than it’s already being done (if). Some red flags from my interactions - Having too many different ideas, getting carried away explaining a technical point without clarifying business implications and not using what you are making. Be focused, be close to the idea and use it in your own life.

Think SCALE

You don't really need a slide with numbers multiplied on it and market sizing theories unleashed. As wise people like to say, if you do complex market sizing calculations, you might be directionally correct but still exactly wrong.

Do a simple back of envelope calculation for them in real time to demonstrate how big you think your business can get. Then think about what it will take to get there - hiring a team, investing in assets you might need or the kind of marketing channels you should have access to. And give them your frank opinion on which aspects you will need the most help from investors.

Ask them all the tough questions

If you are having trouble evaluating all your options (or finding out what they are!) use the VC’s expertise. Ask good, open-ended questions and drawing out full answers. Without this, you won't be able to either get a read on how the meeting's going or how they can actually help you execute your business idea. Try some of these:

  • In my shoes, what would you consider as good funding options?
  • What factors would you consider in timing funding - how much and when?
  • Are there any similar companies/ideas funded by you or your competitors?
  • Who do you consider your closest competitors? What were their last few investments?
  • What companies in your portfolio/network would be of utility to my business idea as potential clients, vendors or partners?
  • How can you help me hire a team?
  • How do you typically engage with young startups? What kind of time and resources do you commit?

You don't have to talk about valuation and shareholding and ESOPs. If your meeting goes well, that's just a detail that they will ask you and then the ball is in your court.

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