What should a series A funding process look like? [Step 2: First meeting and follow up]
You're set to read the Step 2 of raising a series A, once you're done with devising a plan and strategy and also the Step 1 of the process.Since you got an email from the investors admin, I’d recommend meeting investors either on Thursday or Friday. Typically the admin will give you 30 minutes or 1 hour. Plan to finish presenting your pitch in 1/2 your allocated time to leave room for Q&A and a discussion on next steps. I dont recommend taking anyone else for your initial meeting, since its exploratory for both parties.
Typically the email from the investor will request you to “send me something so I can review”. From my experience its better you dont actually send your pitch deck via email, but your ONE page summary. Include detailed profiles of yourself in that one page (5 sentence per founder, with previous *accomplishments*).
Here’s a money tip: Include a link to your LinkedIn profile (not facebook or twitter please) at the bottom of the email with the attachment to your one page summary. [Side note: Make sure your LinkedIn profile is updated]. Make it easy for them to find out about who they are going to meet.
Another money tip: When they click on your LinkedIn profile try to have at least 3 “mutual connections” with that investor. That seems to be a magic number (yeah, I know these may be lame tips, but bear with me).
Prepare for the presentation and show up about 5-10 minutes early (not half hour). Try to pitch your deck to 2-3 others in your company and let them ask you multiple questions.
You should have a overview presentation of about 15 (7 if its a 30 min meeting) slides for this meeting. The average person takes about 2-3 minutes per slide (depending on content), so you will have 30 minutes to present.
There are 2 strategies you can adopt on your pitch deck: Either you go deep on content (the slides should speak for themselves) or moderate (you are needed for the slides, else they are “content free”). There are pros and cons to both approach.
Content deep: Usually used by technical founders, these tend to focus on sufficient detail so that the investor gets a handle of the pitch The pros are: even if you suddenly develop cold feet (rare, but hey that happens) the slides convey your message. The cons: What’s the point of having you in the presentation?
Content moderate: My preferred approach. As you might have heard, investors are people, who invest in people. The pros are: You are in control of the presentation and are able to add “color commentary and provide lots of stories”. The cons: You might forget some very important points you wanted to cover, but those should have been on your pitch deck in the first place.
1. Your background and your co founders: Try to answer these questions in this slide: Are you credible? What makes you unique to solve the problem you are going to solve?
Money tip: Dont use your background slide to only talk about yourself. Use your background to create “connections” with the investors. If you have (smartly) done some background, you will figure out some way to be a Kevin Bacon. Example: I know you invested in <portfolio company> and we recently hired a UX designer from there.
2. The problem you are trying to solve: Stick to 3 real use cases and make sure you have more detailed knowledge of your customer / user. Tell multiple stories here and use 5 minutes of your time on this slide. Why? Most people believe if you understand the problem clearly, you likely have a solution for it.
3. What is your traction? Show them that you are solving the problem already and address the question: So what if this is a problem? Are people buying? Are users signing up?
4. Your estimate of the market – preferably top-down and bottom up. Try to address the skepticism – is this worth the investors time? Money tip: If you market is < $1 Billion for US and < $250 Million in India, dont go to institutional investors. Dont waste your time, because it wont excite them. If you dont know the size of the market, dont make wild-ass guesses. Just say you are doing market analysis in your first meeting. It makes your pitch more credible. Ask the investor for their approach towards market sizing.
5. Your product: Address the question: Do you understand how the problem can be uniquely solved by you?
6. What’s unique about the way you solved the problem? Address the question: Do you have sustainable advantage or unfair competitive advantage over others.This might also be a place to address any unique technology challenges you have overcome.
7. How are you going to acquire customers? What approaches might help you best to acquire customers in a scalable fashion? What distribution mechanisms will you use to get multiple customers in very short time?
8. Competitive landscape. The best way to show this is a two-by-two matrix. Be real.
— If this is a 30 min meeting, you should be done by now.
9. How do you plan to make money (if you dont have financials) Or how are you making money right now?
10. The ask: How much money are you looking to raise and what are you going to do with that money?
Slides 11-15 are for your product screen shots, since SNAFU’s happen all the time and you wont get Internet connectivity (or it will be a really slow connection), when you need it.
Use the last few minutes for Q&A and follow up. Have at least 3 questions about how they can help you get further and what improvements would they suggest to your product.
The easy follow-up asks: Ask for introductions to 2-3 of their portfolio companies so you can get a few customers. If you are a consumer internet company, ask them to use the product and let you know their thoughts. Suggest a list of questions they asked that can be the agenda for the next meeting.
Money tip: If you ask “What is the next step”? most will answer “Let me think about this for 2-3 days and get back to you?" That’s lame.
You should suggest a next step. Examples:
a) Why dont I meet these people you recommend and lets chat on 29th August?
b) Why dont you come by our office and meet the rest of the team so you get a feel for our culture?
What might go wrong and how to fix it?
1. You turn up really late for the presentation or you get lost trying to find the office. Apologize, try to use the shortened time, but most of all, pray that their previous meeting overran.
2. The investor turns up late for your meeting. If this is your top tier investor, you have not much option, but I know most of them will give you appropriate time if they are late. You can also have 2-3 more “asks” if they are late. If this is not your top investor, be courteous, shorten your pitch, and move on. Life’s too short for people who dont value your time.
3. Investor asks you a ton of questions for which you were either not prepared or do not have answers for. Be honest, say you dont know (its okay to not know) and suggest a follow up on your part to prepare and send him answers and meet again when you are ready.
4. Your “live demo” does not work. Go back and read what slides 11-15 are for.
Steps 3, 4 and 5 to follow...