January 09, 2005
Commandment #3: Tease, Don't Overwhelm
First he tells us to "Be on Time" (Commandment #2)....now, he advises: "Tease, Don't Overwhelm"...What the hell does this mean, readers (if any) will be tempted to ask.....But stay with me for a minute. There’s a subtlety here that might help you.
The goal of your first meeting with a VC IS NOT to get a funding commitment. The goal of your first meeting IS to get a second meeting. On extremely rare occasions, funding commitments are made in the first meeting, but only in very unusual circumstances: e.g., where the entrepreneur has worked (successfully) with the VC firm before, or where the proposing partner in the VC firm has been working with the entrepreneurs in the development of the startup idea, etc., etc. In the vast majority of cases, I’d guess that the average number of meetings a startup has with the VC firm that eventually funds it ranges between 3-7 (but curious to know from any entrepreneur readers if their experience is, or data are, different).
So, what does this mean? Here are a couple of thoughts:
· Don’t try to cram six or seven meetings’ worth of information into one meeting. Pique their curiosity, don’t pulverize their attention span. More on this in the next few “Commandments”, but think of the initial meeting as a way to say: “I’ve got a very cool business idea that you should want to know more about.” – that is, almost more of a “teaser” than an overwhelming deluge of information.
· That said, absolutely do make sure you obey the three “Uber Commandments” (see my post on Commandment #1) and tell why: (1) you have a great technology idea, (2) being implemented by a great team, and (3) attacking a huge market in the midst of a transition.
This is probably overkill (and I’m sure goes without saying), but just in case…..this is NOT to advise entrepreneurs to “hide the ball” in any way in the initial meeting. If you want to “succeed” (remember: success in the first meeting is getting the second meeting), you absolutely need to do something that’s really hard: crisply and clearly reduce a complex business message into a short set of slides that intrigues the audience and makes them want to find out more.
January 9, 2005 in Web/Tech | Permalink
I can't speak to an average number of meetings leading to a term sheet, but I certainly agree that it takes quite a few. In my experience the usual pattern was:
- an initial meeting with whomever first became interested in the company;
- from one to many, many more meetings with the same person or people, talking about specific areas or concerns;
- meetings with one or more other partners to validate the intial contact's interest; and
- one or (rarely) two full-partnership meetings for final approval.
Of course there is as much variation in this process as there is variation in VCs (a lot). I did have one firm where the initial meeting was followed by the full-partner meeting the next Monday, and a term sheet later that week. On the other extreme, in late 2000 I met with a firm nearly every week for six months, and received a term sheet from them as well.
I was left feeling that it is very much in the entrepreneur's interest to have a lot of meetings, if you haven't worked with the firm in the past. Maybe ten is a healthy goal. The six-month process, while very frustrating and time-consuming, gave me was a very clear sense of how the firm and the partner worked. I saw how the associates were treated (in this case, the partner included the same associate in every meeting, including the term sheet negotiation, which I considered smart management and training). I saw how the partners interacted, and how the firm interacted with other firms. I saw other companies they funded during that time.
Of course no entrepreneur can devote that much time to each firm; and likewise the firm won't, either. You need to get your company funded so you can move onto other priorities. Take some time, though, to get to know the partner who will wind up on your board, and the firm. If a firm will fund you in two meetings, do you think they will make careful decisions on your board?
Posted by: Marc Hedlund | Jan 9, 2005 12:51:50 PM
I'd like to hear from Harry what is most important to an enterpreneur than getting funding from a top tier VC.
Posted by: Vanilla Chin | Jan 12, 2005 3:38:02 PM
Sequoia calls this there "Cocktail Napkin" challenge. If you cant sell your company on a cocktail napkin, you are going to have trouble selling it. Its actually a great exercise to actually do, only I use a 3x5 card. And as good as this advise is for seeking investment, its even more important exercise for marketing. If it doesnt fit on a 3x5 card, everything from description, to how it works, to the value proposition, to its competitive advantages, forget it! Thats why search advertising works better than other types of online ads - it forces marketers to shorten their msg. And the best ones do.
Posted by: Gator | Apr 23, 2005 1:32:36 PM