Silicon Valley: Turn on the Lights

When it comes to fundraising, doing your homework sounds obvious doesn’t it? But some think this ends when you step out of the school gates for the final time or that a quick search on TechCrunch suffices. No. Every founder, investor, and adviser we met with in the Valley emphasised that doing in depth research is critical. You must have a laser sharp focus about who is going to invest in your business and at what stage. Which V.C is an ideal match for your sub sector? Have you really met their metrics? Be honest with yourself: as a founder, what makes you investible? Research, rejig your approach, and record it all down. And network: in my first Silicon Valley blog I wrote about the importance of warm connections but if you don’t have this then again, do your homework and think about what else can you do to establish comms and build a relationship with a dream V.C.

A few other tips when making an approach: over breakfast Finbarr Taylor, CEO of ecommerce platform Shogun (recently valued at half a billion dollars), told us that if you want to speak to investors here then you can easily be on calls all day as they are very accessible (way more so than across the pond), but be incredibly specific about what you want and how much you are raising. Their time and attention is finite. The Department of International Trade emphasised that if you’re an outsider company and there's any crossover to companies already in the Valley, then you must be able explain to how you are genuinely different.

So you’ve done your diligence, got the V.C’s attention and are ready to send over a pitch deck. This is when any sugar coating stopped on my visit and the advice got real. Chris Neumann, partner at Panache Ventures, said investors want facts, not hypotheses. He doesn’t want to hear about your awards, or your recent press. If you have a slide in your deck that shows more people on your advisory board than on your team, you’ll lose credibility and that V.Cs needs to be able to tell who’s an employee rather than who you're paying to be your friends: ‘the people I want to hear from are founders and customers’.

Cameron Graham, CEO of Storiicare, advised keeping decks as simple as possible and to use DocSend when emailing over (a trackable URL so you can see who views it and how long for- useful intel when fundraising) and if you’re poor at design then just pay someone to do it for you. You must present the deck in the best format possible as V.Cs are often seeing 50+ decks a day. He said ‘if your company was to have a billboard on Times Square, what would it look like’? But to remember it’s not marketing collateral for clients, it's a deck for investors. 

We know that investors make bets: some of the companies they back will turn out to be a total loss, some will make an adequate return, and a rare few will fly sky high. Partly due to the sheer amount of money available, V.Cs in the Valley are less risk averse than in other locations but they’re still taking a gamble and get daily (if not hourly) approaches from founders. FYI, one tech founder told us that for his series A round he pitched to over 90 V.Cs and being repeatedly ignored or told ‘no’ got very demoralising, but to always remember that you just need to convince one person in the fund who will make it their deal. And if you get to the in-person pitch stage then tell a big story that turns on the lights. Chris said that Panache typically makes 25 investments a year so are you one of the best companies that he’s going to see in any given month? (he also said that it’s socially acceptable not to respond to an email or a message as a way of saying no- so develop that thick skin).

To throw a curveball into this blog, in a boardroom meeting with Eric McAfee (entrepreneur, venture capitalist, and philanthropist) he said that he encourages entrepreneurs to think about the different kinds of capital available: the VC world is valued at $60 billion a year but debt is a much bigger world. CEOs need to spend time on considering how they will growth finance the business so must pay attention to the balance sheet.

Of course there’s a lot more to Silicon Valley than growth finance: with its exceptional universities, world class talent pool, and cutting edge research & innovation labs, it’s a crossroads for academia, the government, and private sector. But if you are here to secure funding, then you cannot operate on a one-off transactional basis and should take the time to develop your body of knowledge and build those long-term relationships. The Valley has a unique ‘pay it forward’ mentality which is one of the many reasons why it’s so attractive to generations of entrepreneurs: so learn from it, embrace it, and if you stick around, be sure to give back.