Why you don’t want to grab a coffee with your potential investor. A Venture Capitalist’s Guide of Dos and Don’ts
You’ve just launched a startup; you want to start a business? Don’t look for an investor. Probably, it is not a moment yet.
A brilliant idea is not enough. Once the starting capital begins to fade and the initial enthusiasm starts to vanish, you will probably arrive at the point that makes you look around for an investor. Before writing a cold email, read this short guide of dos and don’ts carefully.
Search for capital for start-ups and enterprises
‘To talk to a venture capitalist, which is an institutional investor, you must be ready – Massimo Sgrelli, Founder and Managing Partner at LombardStreet Ventures claims. – ‘And to be ready means that, maybe, you have to raise the first round from angel investors, possibly local people, then you go to venture capital.
First of all, you need to know the stage of your startup. There is a winding road from concept to execution. Do not bother the venture capitalists if you are still in the research phase. It can be the right moment to reach out to an angel investor. Unlike a VC, a business angel invests his own money. And as a stakeholder, he can provide the expertise and network you need most.
A magic word: traction
What does it mean for a startup to be ready to connect to an investor? It has nothing to do with a fancy pitch deck.
Traction means data-based growth. It is difficult to obtain without funding, but it is also challenging to get financing without traction. But how fast should a company grow to have traction?
Massimo Sgrelli claims that for a software company, in this time, the good growth rate is at least 5%, 10%, 7%, week over week. ‘That’s what we look for – Sgrelli concludes. – And everybody looks for that. So, you need to have your data ready to be presented, then try to attract people’s attention and have 30 minutes with them’.
Seek advice in Silicon Valley
A 30-minutes meeting is all you need. It is even better to schedule an appointment for 20-25 minutes. It means that you treat time as an asset and know how to manage it. Especially in Silicon Valley, if you are about to make a meeting request, don’t ask to grab a coffee together. Think about your goals beforehand and be clear about them. People don’t have time “just to talk.” Maybe you want feedback or partnership, or you simply wish to ask for fundraising. Don’t try to be vague. Be concise. Do an exercise: gradually cut down on what you are supposed to say. In this way, you will discover what you really want to say.