Meeting Investors
If you are meeting investors at an investor day, remember that your goal is not to close - it is to get the next meeting. Investors will seldom choose to commit the first day they hear your pitch, regardless of how brilliant it is. So, book lots of meetings. Keep in mind that the hardest part is to get the first money in the company. In other words, meet as many investors as possible but focus on those most likely to close. Always optimise for getting money soonest (in other words, be greedy).
There are a few simple rules to follow when preparing to meet with investors.
First, make sure you know your audience- -do research on what they like to invest in and try to figure out why.
Second, simplify your pitch to the essential - why this is a great product (demos are almost a requirement nowadays), why you are precisely the right team to build it, and why together you should all dream about creating the next gigantic company.
Next make sure you listen carefully to what the investor has to say. If you can get the investor to talk more than you, your probability of a deal skyrockets. In the same vein, do what you can to connect with the investor. This is one of the main reasons to do research. An investment in a company is a long-term commitment and most investors see lots of deals. Unless they like you and feel connected to your outcome, they will most certainly not write a cheque.
Who you are and how well you tell your story are most important when trying to convince investors to write that cheque. Investors are looking for compelling founders who have a believable dream and as much evidence as possible documenting the reality of that dream.
Find a style that works for you, and then work as hard as necessary to get the pitch perfect. Pitching is difficult and often unnatural for founders, especially technical founders who are more comfortable in front of a screen than a crowd. But anyone will improve with practice, and there is no substitute for an extraordinary amount of practice. Incidentally, this is true whether you are preparing for a demo day or an investor meeting.
During your meeting, try to strike a balance between confidence and humility. Never cross over into arrogance, avoid defensiveness, but also don’t be a pushover. Be open to intelligent counterpoints but stand up for what you believe and whether or not you persuade the investor just then, you’ll have made a good impression and will probably get another shot.
Lastly, make sure you don’t leave an investor meeting without an attempted close or at very minimum absolute clarity on next steps. Do not just walk out leaving things ambiguous.
Negotiating and Closing the Deal
A seed investment can usually be closed rapidly. As noted above, it is an advantage to use standard documents with consistent terms.
Negotiation, and often there is none at all, can then proceed on one or two variables, such as the valuation/cap and possibly a discount.
Deals have momentum and there is no recipe towards building momentum behind your deal other than by telling a great story, persistence, and legwork. You may have to meet with dozens of investors before you get that close. But to get started you just need to convince one of them. Once the first money is in, each subsequent close will get faster and easier.
Once an investor says that they are in, you are almost done. This is where you should rapidly close using a handshake protocol. If you fail at negotiating from this point on, it is probably your fault.
When you enter a negotiation with a VC or an angel, remember that they are usually more experienced at it than you are, so it is almost always better not to try to negotiate in real-time. Take requests away with you and get help from advisors or legal counsel. But also remember that although certain requested terms can be egregious, the majority of things credible VCs and angels will ask for tend to be reasonable. Do not hesitate to ask them to explain precisely what they are asking for and why. If the negotiation is around valuation (or cap) there are, naturally, plenty of considerations, e.g., other deals you have already closed. However, it is important to remember that the valuation you choose at this early round will seldom matter to the success or failure of the company. Get the best deal you can get - but get the deal!
Finally, once you get to yes, don’t wait around. Get the investor’s signature and cash as soon as possible. One reason SAFEs are popular is because the closing mechanics are as simple as signing a document and then transferring funds. Once an investor has decided to invest, it should take no longer than a few minutes to exchange signed documents online and execute a wire or send a cheque.
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