This document provides tips for entrepreneurs approaching venture capital (VC) firms for funding. It discusses understanding the VC business model, what makes an attractive investment opportunity, how to match your company's stage and profile to the right investors, pitching effectively, and navigating the matching process. The key points are that VCs seek huge financial returns, only invest in the top 1% of opportunities, look for large total addressable markets, proven teams, and high-growth potential. It emphasizes networking, choosing the right partner over firm, and being prepared to commit fully once funding is secured.

1. What To Know When
Approaching A VC
A Primer, and a few important tips.

2. What We Will Cover
1. VC Econ 101 – Know Your Customer
2. Profile of a Hot Deal
3. The Stage/Company Match
4. Getting a Meeting
5. Pitch Essentials & Common Pitfalls
6. The Match Making Process
7. Some General Advice

3. Part I: VC Econ 101
Raising capital is a sales effort, so you need to know
what motivates your customer to buy.

4. The Single Deal Axiom
“Your company must exit at a price
that repays your VC’s entire fund.”
 Typical VC funds are $200 million in size.
 Typical VC stake at exit is 10-20%
 Since Profit = Exit * %Ownership…

5. Your Company
Needs to Sell
for $1-$2 Billion

6. The “Limited Capacity” Axiom
“A Partner in a venture firm makes 1-2 investments per
year. So you can’t just be good in their eyes, you have to
be top 1%.”

7. Part II: Profile of a
$Billion Exit Prospect
(AKA a “Hot Deal”)

8. 4 Attributes of Hot Deal
Uber Geek Proven Friend of Proven
Wunderkid Executive the Firm Entrepreneur
1.Highly Backable CEO

9. 4 Attributes of Hot Deal
2. Unbounded Market

10. 4 Attributes of Hot Deal
3. Frictionless Growth

11. 4 Attributes of Hot Deal
4. Scarcity

12. Part III:
Matching Investor
with Stage

13. What is “Early Stage”

14. “Backable Early Stage”
1. A Company with no business traction, but a great team
and really amazing concept.
2. A Company with really amazing business traction and
a team that can execute.
3. A Company with some exciting early traction and a
solid team.
IMPORTANT: Nobody but friends and family will fund a
business with an unproven team and no traction!

15. Who Should You Target?
Proof Points
Team
Strength

16. Part IV:
Getting a Meeting

17. Get a Warm Intro

18. Reach Out Over Email
 Send a short thoughtful note
 Why they are a great investor for your company
 Why they should be excited to meet with you
 Attach a slick, scaled down pitch (10-15 slides) with the
essential elements.
 Send these emails Tue-Thu.
 Partner meetings are on Mondays, and Friday emails get
buried.
 Never send anything important late on a Friday

19. Be Persistent
 Anyone on the buy side in finance has a great barrage of
incoming. Assume that your first note was glanced at on a
smart phone and forgotten.
 Use your warm intro connection more than once and as a
back channel.
 Good News – Getting a Meeting is by far the easiest part of
the process. The hurdle rate for a meeting is low.
 Bad News – Getting a meeting does not mean an investor is
interested. It just means they are allowing for the possibility
they might one day be interested.

20. Part V:
Pitching Tips

21. Must Have #1: TAM
Total Available Market = TAM
TAM = ($ from one cust.) x (# possible cust.)
If you are selling accounting software, your TAM is not the
entire software market. It is (the number of firms that
would possibly choose your software) x (their total
population in the world.)

22. Must Have #2: The Ramp
 Your ramp exceed $40 million in year 4

23. Must Have #3: Competition

24. Must Have #4: Concise Pitch
 Plan for 30 minutes of presenting time. If you plan to
talk for an hour, there is no way on earth you will finish.

25. Other Important Tips…
 Avoid Slides that look like this one. There are way
too many words on this slide. It is boring as hell, and
the title doesn’t make an affirmative point.
 Never discuss valuation. Say how much you are
raising, say if it is a note or equity, but don’t presume
you are in a position to dictate terms.
 Pitch to a Partner. It is always best to pitch directly to
a check writer. If you approach an associate and get
turned down, it is very hard to recover.

26. Your Goal is to get a
2nd meeting. Get them
excited, and don’t bury
them in detail.

27. Part VI:
The Match Making
Process

28. How they choose you
 Market Risk
 Technology Risk
 Execution Risk
 Financial Risk
 Chemistry
 Vision Alignment

29. How you choose them

30. Size Matters
 Bigger is not better
 They can take longer to make decisions
 They have more complicated decision making which
makes it less likely they will say yes
 They tend to “upgrade the team” earlier.
 They always play for upside, and tend to turn down what
the founders would consider attractive acquisition offers.
 The partners are often spread thinner, so you might not
get much attention post investment.

31. Size Matters
 Taking biger fund money also has advantages for the
founders:
 Larger firms are great for deals that require large
amounts of cash rapidly
 Pharma
 Semiconductors
 B-C plays
 Large brand name funds attract follow-on capital and
executive talent
 They can afford to pay up for deals they really want

32. Choose the partner
not the firm
 Shared vision of target market evolution.
 Personal Chemistry
 Right mix of help and patience
 Know when to ask the hard questions
 Know when to leave you alone
 History of success –> has clout with partners.

33. Experience Matters
You don’t want this guy You want this guy
(even after a 31-0 loss to Buffalo)

34. Lastly, Some
General Advice

35. Talk to other Entrepreneurs
 Go to meetups, network, network, network
 Information is power and the more you know about the
people you are speaking to the better
 Are they knowledgeable about your space?
 Have they done a lot of deals already from their current
fund?
 Who are the decision makers and how do decisions get
made (firm led or partner led)?
 With whom do they typically syndicate?

36. A Serious Commitment
 Once you take investment this is no longer your
company no matter how much you own
 With great dollars comes great responsibility
 Share holders
 Employees
 Management team career paths

37. A Serious Commitment
 You have committed to do great things
 Once you take VC your new found friends have very real
and very big expectations and its your job to meet them
 No small ball.
 Raising VC is an enabler not a milestone
 Many entrepreneurs think that once they raise VC they
have made it!
 Your business is probably more risky now than before you
took investment capital

38. Scott Johnson scott@navfund.com
Jim Schoonmaker jschoonmaker@everyscape.com
Matt Brendzel matt.brendzel@generalassemb.ly