How to Approach the Right VCs10 min read

How to approach the right VCs

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“Don’t speak to investors too early”, said William McQuillan, Partner at Frontline Ventures, in SaaStock’s How-To Series.

You often see founders approaching investors way before they are ready to fundraise.

Shift the odds in your favour.

If you can build a relationship with an investor over two years, that’s great. You will build a solid relationship.

But trying to build a semi-faux relationship three to six months before a round won’t do you any good.

Watch now:

You’re much more likely to get an investment round together if you’re prepared, and have everything lined up to amplify the momentum you can build in a fundraise.

This way, you’ll bring in the right investors that will add the most value to your company.

Learn more on how to approach the right VCs in five steps from William. Watch the full video on our YouTube channel. You can also read the full transcript of this video below.👇

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Transcript

Alex Theuma:

Welcome to the SaaStock How-To Series, in which we aim to answer questions posed by our community, and give you three actionable takeaways. I’m Alex Theuma, CEO of SaaStock, which helps SaaS companies get traction, growth, and scale through our community, conferences, and content. Today, I’m delighted to be joined by William McQuillan, Partner at Frontline Ventures. How’s it going, William?

William McQuillan:

Hey Alex, how are you? Thanks for having me.

Alex Theuma:

Good to have you here on the How-to Series. William, the question that asked by our community here is, how to approach the right investors? Quite a common question. I thought I’d ask you this, so over to you.

William McQuillan:

Great. Thanks Alex. When your team emailed me about this, the way I thought about it was, I would break it into five steps, so we both can think about it pretty straightforwardly. The first thing, and it sounds pretty counter-intuitive, but don’t speak to investors. At least don’t speak to investors too early. So often, I see entrepreneurs approaching investors way before they’re ready to fundraise.

William McQuillan:

I think part of this is the VCs’ fault. VCs on panel discussions, in blogs and podcasts, they always tell entrepreneurs, “Build relationships with the investors before you fundraise.” Actually, I think that that’s advice that favors the venture capitalists, but not necessarily the entrepreneurs.

William McQuillan:

In reality, if you can build a relationship with an investor over two years, that’s great, you will build a proper relationship. But trying to build a semi-faux relationship three to six months before a round doesn’t actually build a deep relationship. All it does is, it makes it feel like you’re starting to raise your round six months before you are. One of the problems of most venture investors is that they have long memories and short attention spans.

William McQuillan:

So effectively, the long memory, if you tell them, “Hey, this is what I’m going to do over the next six months before I fundraise,” and you don’t deliver on all of that, they will remember that. It’s not even their memory that needs to remember it. They have deal-flow systems where they will track all of that. That’s something that you’re setting yourself up to fail. You might still accomplish a lot, but maybe not everything. It’s, in my opinion, not the best approach.

William McQuillan:

Secondly, on the short attention spans, VCs like momentum, they like growth. That’s what we like and look for in our companies. If you’re delaying that process out by six months extra trying to build a relationship, that actually feels like there’s a lot less momentum to your funding round. So step one, don’t talk to investors too early.

William McQuillan:

Step two is, get your house in order. Again, a lot of entrepreneurs approach us, and they really just haven’t even put their deck together. They haven’t got anything ready. Before you talk to investors, you should have all of this prepped, because when you then start to talk to investors, you can concentrate on the meetings with the investors, the questions they’re asking, rather than preparing materials. A lot of this is obvious, but things like funding decks, teasers, [inaudible 00:02:49] tables, financial plans, market assessments, that sort of stuff, have all that ready.

William McQuillan:

The next thing is practice your pitch. There’ll be some people listening to this who are gifted orators and storytellers, and great for them. But I can tell you, after listening to thousands of pitches over the last 10 years, the majority of people just aren’t gifted orators and storytellers, and that’s completely fine. That is not a compulsory trait to build a huge company, but when it comes to pitching, practice makes perfect.

William McQuillan:

The more you practice it, the better you’ll get. I can’t tell you the amount of times that entrepreneurs have pitched us where they tell us, “This is the very first time that we’ve pitched the company in front of anybody,” and it often shows. We see it even in our own portfolio, where these are companies that we already think are great companies, great founders, great products.

William McQuillan:

When they come and practice their pitches for their series A, their first pitch versus the one that they eventually go live with, after we’ve made them practice it a ton, honestly, you’re talking about chalk and cheese in difference here. The final one being so much better, and that is down to practice. So step two is really get your house in order, get everything ready, and then practice your pitch so that you’re ready and you’re polished with it.

William McQuillan:

Step three, how to target the right investors. I see a lot of entrepreneurs do this spray and pray strategy where they just think, “All I need to do is find the one investor that will put the money in.” The reality is that you’re much more likely to get capital from the investors who understand your space, who can add value, and support your business.

William McQuillan:

So the biggest advice I give when it comes to targeting the actual investors is, think about what are the top challenges you’re going to face over the next 18 to 24 months? Maybe that could be getting product market-fit. Maybe it could be targeting certain types of customers. Maybe it’s pricing, maybe it’s in leadership, maybe it’s engineering.

William McQuillan:

Whatever it could be, write down what are the top three to five, and then use those as, effectively, scoring to figure out what are the best investors for you. That could be angel investors, that could be VCs. The great thing now is that there’s so much information available online, that you can really understand in depth, which investors have what skills, what experience, have worked with what similar companies, that you might have [inaudible 00:05:06] to your company, and use that to then find those people.

William McQuillan:

Okay, great. So now you’ve figured out those 15 to 20 most valuable potential investors, and those could be angels and VCs. Again, actually, one other thing I’d comment is when it comes to the VCs, it’s important to think about firms, but in reality, what you should be focusing on is not on firm, but on the investor in the firm.

William McQuillan:

There are people in Frontline who bring very different experiences and values to any particular company, and so different partners in Frontline or different investors in Frontline might be more suitable for different companies. That’s the same for every single company looking to speak to venture capital firms.

William McQuillan:

So now that you’ve got the list of investors that you want, now step four is lining up the intros, if you will. Let’s say you’ve got 15 to 20 people, try and look on LinkedIn and social media, try to figure which are the warmest introductions you can get to those people.

William McQuillan:

Now, I understand that not everyone will have warm introductions to every investor, but as a starting point, figure out if you can get any warm introductions, then reach out to… so for example, Alex, if I saw that you were connected to an investor that I wanted, I would say, “Alex, Hey, can you introduce me to X investor? I don’t want the introduction right now, but in a month’s time, when I start to fundraise, will you be able to make that introduction?” So you’re just lining everything up.

William McQuillan:

Then for the investors that you don’t have warm introductions to, again, the great thing is that there’s so much information online. Firstly, there are some VCs who are very open with their contact information and put it on their websites, put it on the internet, on their LinkedIn, and so forth. That’s great. Then you have that.

William McQuillan:

For the ones that don’t, look at their social media. So many people use different platforms to communicate. Some might be Twitter, some LinkedIn, some even on Instagram… I see quite a lot more using Instagram… and DM them on those platforms when you’re ready to fundraise, but first figure out what is the right platform to contact them on.

William McQuillan:

Now, you’ve got your material in order, you’ve figured out who the right investors are, and you’ve got the right routes to each of those investors. Then the final step is lights, camera, action, press that launch button, and get everything going at once. Sounds a bit hectic and mad, but because you’ve got everything prepped and ready, you should actually be able to get through this pretty quickly.

William McQuillan:

The great thing is that the venture capital world in particular, honestly, it’s one of the leakiness buckets in the world when it comes to gossip. VCs are meeting and talking to each other all the time, and they’re always sharing information. Our business is a huge amount about trading information about other venture capital firms.

William McQuillan:

So if you’re targeting, trying to target all the key people at once, word will spread around very quickly that this company is raising, this company looks interesting. Because everybody like, “Oh, I just heard from this company”, “I’m speaking to them too”. That really helps you build momentum in your round.

William McQuillan:

Of course, these steps don’t guarantee anybody to be able to fundraise. What I’m trying to do is trying to shift the odds in your favor. If you can really try and be prepared, have everything lined up, which really amplifies the momentum you can build in a fundraise, you’re much more likely to get an investment round together. If you’ve targeted the investors in the right way, you should hopefully be able to bring in the right investors, that hopefully will be adding the most value to your company.

William McQuillan:

You asked for three core takeaways. What I’d say is, don’t speak to investors too early, target investors based on who’s going to help you with the best challenges, and really don’t spread it out, try and do it all at once when you’re ready to go.

Alex Theuma:

Awesome. Awesome. William, thank you so much for answering that question. Really great advice there for anybody that’s looking to approach the right investors, and raise that next round. Thanks, William.

William McQuillan:

Great.

Alex Theuma:

Where can people find you online?

William McQuillan:

They can find me on LinkedIn. They can find me on our website in general. Thank you for maybe setting that up, Alex. If Frontline happens to be on that list of investors you think is going to add a lot of value, please reach out. We’re very available on many different platforms, so you can, I’m sure, find a way to get in contact with us.

Alex Theuma:

Awesome. Great stuff. Thanks, William.

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