Talking with a Junior VC – That and $3.50 will get you a non-fat organic soy latte (part 1)
As an associate at a venture capital firm, I get to spend a lot of time speaking with entrepreneurs about their startups. Talking with founders and entrepreneurs is basically what motivates me to get out of bed in the morning; usually I find learning about new business ideas and technologies pretty freaking awesome. However, I can appreciate that most founders would likely rather interface directly with a partner instead of spending time with me. After all, I am not a decision maker, am not on the firm’s investment committee, and – given that the VC business is an apprenticeship business – am still in the “learning” phase of my career. However, entrepreneurs seeking venture capital should realize that the junior VCs can be either roadblocks or valuable allies in the search for funding.
This is the first of two three posts on best practices when you have to deal with a junior VC during your funding search. (The second post addresses some of the underlying motivations you may find in a junior VC.)I may be able to convince you that junior VC’s are not a total waste of time by the end of these posts! (I hope that these come across as helpful and not overbearing or pompous and welcome your feedback.)
If you find yourself in a conversation with a non-partner VC your goals are pretty simple:
1) Get that person’s fund raising advice. Regardless of your opinion of junior VCs, we do see a lot of new investment opportunities and often have a decent idea of what other funds may be active in your space. Have we seen any other companies in your space raising funds? How are VCs in general reacting to companies in your industry? Are there other funds that are likely to be interested in what you are doing? Ask if the pitch is good or what could be added to make it better. Every junior VC will have opinions on this… imagine hearing dozens of funding pitches in the same industry – you’d have opinions on what works best too!
2) See if you can get any market intel. Earlier this week I had breakfast with a young VC at a nearby fund. He’s spoken with 42 companies within a very specific financial technology vertical in the past month. I’d say his fund is interested in that space, and I’d also bet that he’s got some decent opinions on where the general market is headed. Has he built a company in that space like you, the startup founder? No. But he’s likely got some very current market intel and it might be worth seeing what you can learn if you’re having a conversation with him.
3) End up with a meeting with one of the fund’s partners. This is the most important goal (duh). Time is the enemy of the VC, and our partners are looking to us as the junior VC to help them be more efficient. This includes rejecting companies that do not fit the fund’s or partner’s investment profile and asking basic the questions that the partner would want to know before walking into a meeting. I hate rejecting people, but I have to do it. (Incidentally I’ve noticed that I tend to do it on Fridays, since I put it off during the week because it’s so painful.) I also have occasionally had the partner reject a meeting that I’d like him to take. If I really like a company I’ll push pretty hard. This is where I become your advocate within the fund, and if you’ve shared with me a great fund raising presentation I will use it as a valuable tool to convince the partner. Last week, a company that I had been speaking with presented to one of our partners. This partner did not initially think a meeting made sense because he thought the market was uninteresting. Because I knew this partner would reject the meeting out of hand (based on the company’s space) I had several conversations with the CEO to prepare for MY pitch to the partner on why he should take the meeting. We put together solid backup information, which I used in conjunction with a presentation that the CEO developed, to get the partner to take a meeting. The meeting went well and now we are starting preliminary work on the company – something that never would have happened if I hadn’t been the first person to interact with the company. Even as a junior guy, I can be helpful in the fund raising process. (However, for every company like this there are several that get rejected; fund raising is still a brutal process.)