Raising Your Institutional Round: Chapter 11

This is the 11th chapter of my upcoming book, “Move the Needle Anyway(s): Raising Your Institutional Round.” There are a total of 16 chapters. The book is currently with the publishers, however, I wanted to start sharing the content in a form of a series of blog posts so the startup ecosystem can benefit immediately. I hope you enjoy :)

Chapter 11: First Meetings

You want to stack first meetings as much as possible so you create urgency and momentum in your process. While I value and appreciate the importance of having strong, lasting interactions with people, fundraising is a numbers game, and your role is to secure one lead investor so you can finish raising the rest of your round. By stacking meetings (3 or 4 back-to-back), you will be able to:

• Quickly warm your fundraising muscles up.

• Avoid overthinking the process. 

• Quickly learn from each conversation and iterate the way you position your startup and answer investor questions. 

• Let every investor know that they aren’t the only party you are speaking to.

During the first 30-minute meeting, the investor will be evaluating you as a founder and your opportunity to see if they should commit to the next, deeper stage of evaluation. Typically, they will have briefly reviewed a short deck/blurb about your business ahead of this meeting. However, don’t assume they properly understood your business. I recommend asking them what their understanding of your business is so you can fill in any gaps or clarify any misconceptions. They will be evaluating:

• Your pedigree via status, associations, and achievements. 

• How well you speak about your opportunity. 

• How well you handle difficult questions.

• Your ability to sell and be compelling. 

• How believable your opportunity at scale really is. 

• Your unique insight about your industry. 

Remember what was covered in Chapter 1—to some degree, every human being is driven by the meta thought processes of these three questions when it comes to any decision they make:

• Does this make me look good or does this make me look bad? 

• How can I look good? 

• How can I avoid looking bad?

You want to make the investor look good because they will be staking their reputation as they run you up the ladder to their partnership and investment committee. By the end of the first meeting, you want them to:

• Feel that you are an impressive leader. 

• Believe that your company’s approach (i.e., GTM and Product) can capture the market opportunity ahead and return a big portion of their fund. Remember, they are responsible for generating returns to their investors (Limited Partners).

The meeting won’t be you walking through the deck in a pitch format—it’ll be more of a conversation (Q&A) about you and your business. It is also an opportunity for you to understand their perspective about your opportunity and what their investment process looks like—you have every right to ask them about this. Furthermore, where appropriate, position yourself as an expert in your space—be open to hearing others’ opinions, but be willing to control the frame, and, defend your position on the space and opportunity especially if you disagree with the investor’s position. When done correctly, they will respect you for your conviction and strong point of view—you want to be considered a force of nature.

Your goal for this meeting is to get them bought into having the next meeting. Remember that every meeting is about moving the prospective investor down your funnel, from first meeting to second meetings, to deeper diligence and a partnership meeting. 

Do not get caught up in answering too many detailed questions—while this might be a proxy for investor interest, it doesn’t always lead to conviction. Instead, be thoughtful about controlling the frame. If you feel the investor is getting too deep, bring them back up to a higher elevation and connect your answer to why you are an exciting investment. 

For example, if they are in the weeds about your product, remind them how that feature/initiative will accelerate your sales motion, expand average contract value (ACV), decrease implementation times, and decrease the delta between contracted revenue and live revenue. Remind them why it will help your company capture a large portion of the market and generate huge returns on investment. Then, remind them that you could do deeper dives about product and GTM in subsequent calls assuming they can see a potential partnership here—schedule those calls and invite your key leaders (e.g., Co-Founder, CTO, VP of Product, or VP of Sales, for example).

If the investor wants you to do the pitch and doesn’t ask questions, don’t just walk through the deck. Instead, control the frame with an engaging, self-manufactured Q&A. For example, “Great. Here are a few important questions I think anyone should be asking when they evaluate our business opportunity…” Then proceed to answer them. Think of this as a sales pitch but in an FAQ format. 

Your responses to any questions should attempt to signal any one or more of the following, truthfully:

• You’re aggressive on growth and capturing the opportunity ahead. 

• You love being as scrappy and efficient as possible. 

• You’re a numbers person and you know your business.

• You are a systematic risk mitigator.

• You welcome negotiations with people and are reasonable to deal with. 

• You love winning. 

If you do the above well, you will raise the investor’s heart rate enough that they will want to move to second meetings. Which brings us to second meetings. Assuming the investor is interested, they will look to schedule follow-up meetings to discuss key aspects of your business, such as your GTM motion and your product. If the investor you spoke to is a partner and they haven’t given clear guidance on next steps, you are within your rights to suggest the next steps. You want to lead the process versus being too passive. 

Remember, investors are human beings too—things slip because they have numerous other priorities to tend to. Don’t assume institutional funds are as organized across the board. They are larger entities with more headcount than your average seed-stage fund, and they are dealing with operational challenges too. 

If the investor wants to meet you for drinks or a dinner at this stage—be open to it. However, I don’t suggest you fly out to another city to make it happen unless you are closer to the deeper diligence phase of the process (data room). I would rather you focus on moving as many other VCs through the early meetings process of your funnel. If an investor is willing to meet you somewhere local that is convenient, take that meeting because it is fair for the investor to want to get to know you, especially since the first institutional check will be a much larger sum. The larger the investment, the longer it’ll take for someone to get comfortable with you and your company before investing.