The Coffee Meeting: Caffeinating Your Startup Journey

A movement towards impact can be ignited one cup at a time. An innovative startup aims at impact so that its return on investment equates its return on impact. Investors are more apt to invest and the innovation ecosystem thrives. The startup "Coffee Meeting" is a mystical prize many founders covet and investors love (well, at first, aspiring investors are wonderfully curious and not sure what to talk about). The coffee meeting is sometimes the CATALYST to a great funding journey for an entrepreneur and investor, so caffeinating this startup journey is essential on BOTH sides of the venture table.

"Three hundred years ago, during the Age of Enlightenment, the coffee house became the center of innovation." -Peter Diamonde

TIMELINE FOR FUNDING: The coffee meeting is a catalyst

In the typical timeline for funding, the coffee meeting is typically near the front of the timeline, between an initial meeting or intro and a deeper dive into the startup, it truly ignites the trust-building and positions the next steps of the journey, truly CAFFEINATING the process. If an entrepreneur gets a coffee meeting, the chances of closing the deal with that investor is 20%, increased from the intro stage (at 10% likelihood) & initial contact stage (at 15%). If the coffee meeting does well, entrepreneurs typically send an update to the investor with any traction that has been accomplished or next steps that they discussed. There might be a meeting at an event between them or better yet, a diner/lunch invite to deep dive more. The due diligence process is always being conducted from the initial meeting, but the deeper process and research usually happens after some initial meetings and before funding is negotiated. When funding is being negotiated (about 1 month out from the initial intro), there is a 70% likelihood of closing. After that negotiation, there are a couple of more investor interactions until the actual funding is wired (I say that there is always a 75% chance at that stage until you get the money in the bank).

This is all well and good, but let's dive into the WHY behind the coffee meetings, taking an approach that ENTREPRENEURS should have coffee with investors for advice and funding and other entrepreneurs for growing networks & funding insights, and INVESTORS should have meetings with entrepreneurs and other investors for activating more capital (through syndication & inspiring other aspiring investors to take the risk).

When the WHY is clear, the HOW is is easy

FOR ENTREPRENEURS. Why Coffee Meetings with investors? To gain funding

• Personalize the startup journey. Get to know the investors in an intimate, 1-on-1 setting that is more casual and personal.
• Gain valuable insight into the investor. As a startup founder or team, you should do as much due diligence on the investor as they do on you.
• Build TRUST with investors. Trust is the most valuable currency of startup funding, so continue to create it with the investors you jive with.
• Pitch in a different setting. Pitching in person or at a startup competition or over zoom can be more robotic. Communicating the nuances of your unique value proposition is an art that can be more easily distilled over a nice cup of coffee.
• Explain your WHY. AN investor will invest in you more frequently and more confidently when they know your why. The best way to explain this is over a cup of coffee.

People don’t buy WHAT you do, they buy WHY you do it. –?Simon Sinek

FOR ENTREPRENEURS. Why Coffee Meeting with other founders? To build networks

• Founders are a great source of insight into investors. Finding values-aligned investors is hard to find, so ask other founders for guidance and insight into the investors who are truly interested in startup companies like yours and founders like you.
• Networks are a web of influence. Gain valuable intros from other founders to investors or connectors who will lead you close to a funding opportunity.
• Resource opportunities. When fundraising there are so many resources you will need, from legal to marketing to accounting to mentoring. Connecting with founders who are in the throughs or just raised a round is invaluable.

FOR INVESTORS. Why Coffee Meetings with entrepreneurs? To invest

• Support Entrepreneurship. To gain more deal flow, to ignite more ideas, to solve better and bigger global problems, investors have the responsibility to support entrepreneurship in general, and the best way is to meet entrepreneurs over coffee and discuss.
• Breaking down the business into smaller conversational chunks. Sometimes a pitch is too long to absorb the entire company, so a coffee meeting is the best way to chunk it done, explain and build more authority as an entrepreneur in the investor's eyes. This also helps you as an investor talk about the start and start the syndication or co-investment process with other investors or help in the start of the due diligence process.
• Understanding the entrepreneur. For the investor, especially at the earliest stages, understanding what makes the entrepreneur tick is essential.
• Get a gut feel/intuition of the founder. In-person, this is more relevant, but most investors if they have been investing for a while, have a gut instinct about the founder or startup company idea that they need to trust. Many women investors have strong intuition but sometimes don't act on the gut feeling they have, so rely on it and trust it.
• The qualitative portion of the DD process. Much of the due diligence process is quantitative like the size of the market, revenue generation, LTV, CAC, etc., but the coffee meeting can bring out the qualitative analysis essential for robust due diligence.
• Assess the EQ of the entrepreneur/founder. Investors are looking at the emotional intelligence of the founder, their strengths, and their coachability, as they build their startups and bring on team members. The coffee meeting is the perfect time and place to assess and ask questions.
• It’s a marathon, not a sprint. It’s also about the journey more than the destination (or the check). The journey of an entrepreneur can be long and varied, so the more we can create an ecosystem of support alongside that journey, the better our collective ecosystem will be.

FOR INVESTORS. Why Coffee Meetings with other investors? To activate

• Build trust. TRUST is the most valuable currency for investors, so the more you connect with other investors, experienced and aspiring, the more you can create trust bridges of shared experiences, shared successes, challenges, and portfolios.
• Support aspiring angel investors. It is so important to pay it forward to professionals in your network who are curious about investing. If you are an experienced investor, meet up with a less experienced investor to mentor and share deals, it makes all the difference.
• Supporting growing investor ecosystem. The way to grow an ecosystem of like-minded professionals is to cultivate curiosities and opportunities, and what better way over a glorious cup of coffee.
• Sharing deals. Deals are shared via email, text, platforms, and word of mouth, but to talk over a set of deals you have made over a period of time with another values-aligned investor, talking about the terms, founders, industries, is the BEST way to grow deal flow, knowledge share and increase your awareness of investment trends. This also sometimes results in co-investing in deals, which is a great way to decrease the burden of due diligence and de-risking investments.
• Learning from each other. From professional expertise to industry know-how, talking with another investor is so incredibly valuable because angel investing and VC are risky investments so the more you know, the better informed you are and the better investments you make.
• ACTIVATE new capital. If it's meeting with an aspiring investor or an existing investor, activating more capital for the innovation ecosystem is always a good thing. Getting excited about a startup or founder is wonderful, being able to provide access to capital to a startup where there was not before, is priceless.

FOR BOTH SIDES, INSIGHTS FOR A PURPOSEFUL COFFEE MEETING:

• Be Present. Especially in our world where everyone is “too busy”, it's easy to be distracted by your phone or the next meeting you have, so be present in the moment of learning about each other, investor who invests in innovation, and founder who lives innovation. A coffee meeting is a time to listen.
• Be respectful. It's as simple as that.
• Be curious. Founders & funders in the innovation ecosystem are naturally curious, they care deeply about economic development or building wealth and there is a commonality that should be talked about and found. Be curious about the innovation being talked about, the impact it will make and the lives being transformed.
• Be yourself. Uniquely show up as yourself because that is a beautiful thing. Everyone is uniquely made and the more we can connect on a human level, the lines between the definitions and power dynamics between a founder & funder are lessened and more exciting discussions can be made.

FOR ENTREPRENEURS, INSIGHTS FOR A SUCCESSFUL COFFEE MEETING

• Be coachable. This is the number 1 trait that most investors love about a startup founder, one who listens to advice and discusses and possibly pivots if the advise is good for the startup's success.
• Be open. Investors know that the startup you both are speaking about is your baby and it's hard sometimes to listen to mentorship about the development of the technology or the team, or (you name it), so be open to the discussion during a coffee meeting.
• Be observant. While discussing your startup, be aware of not pitching too long, chunking out information, diving into things investors are curious about, and biased questioning, so that you can pivot as you observe. Also, be aware of non-verbal cues like leaning in for intent or leaning out when not interested.
• Be grateful. The journey of fundraising and coffee meetings, due diligence time frames, meetings upon meetings, is very time-consuming, but the more that you can show a grateful heart and spirit, gratefulness will come back to you. This builds trust.

FOR INVESTORS, INSIGHTS FOR AN EFFECTIVE COFFEE MEETING

• Be Thoughtful. Probably the first time a founder meets an investor, founders might be extremely nervous (this plays out sometimes as overconfident, or shy or overly loud, there are many ways to display nervousness, so be aware).
• Be aware. The startup journey is a rough one, founders are managing a ton of responsibility, so be aware of how they show up and what they speak about. If they are careful about patents, talk about the high-level information about their technology for your curiosity and if interested, you can ask for more information to be sent later.
• Be available. Provide a value-add for founders, be available to provide constructive mentorship even during the meeting so that founders can get one step closer to funding their startup (even if it's not with your investment). If appropriate, share your network.
• Be welcoming. All anyone wants is to be acknowledged for their hard work, so allow for founders to talk about their startup, welcome them into your space, and discuss.

THE NUTS AND BOLTS OF THE COFFEE MEETING

Here are some conversation builders:

• What was your last investment? Why were you excited about it?
• How do you share deal flow with other investors?
• What type of advisor are you looking for? What type of investor are you looking for?
• What is a win-win for your portfolio companies?
• What has inspired you the most about our ecosystem?
• What were your favorite events you went to in the last month?
• Have you read an interesting book, or article, or listened to a podcast about startup investing or funding that you liked?

This allows BOTH investors and founders to better understand the values ad network they are both collectively building.

NUTS & BOLTS: TIPS FOR BOTH SIDES OF THE VENTURE TABLE

(for specifics, I will call out [founder/startup] THEN [investor]:

• Do your homework. Look up the professional profiles of the [founder & company] or [investor & investment group/fund] through Gust, LinkedIn, Facebook, Twitter
• Paying: it really is a toss up, depends primarily for me on who asked for the meeting
• Ask how their day is going
• Allow them to share what they’re looking for in an [investor] or [founder]
• Share how you can provide them value (as succinctly as possible) to their [startup] or [portfolio]
• Share [why you started the company] or [why you invest] because stories unite and build trust.
• Summarize the meeting & set appropriate expectations for the next steps. Doing this collectively is nice, but sometimes the founder or investor leads this. Just make sure it gets done. You don't want to be buried in more meetings with no executables.
• Mention how valuable the meeting was to you to [understand what investors want] OR [better understand their startup]
• Connect them to others who can help them (only if they actually can)
• Always be filled with gratitude & abundance - our collective ecosystem THRIVES when both sides have this midset.

NUTS & BOLTS: BEST PRACTICES

1. Listen for 2 or 3 (or more) minutes for every minute you talk.
2. Investors don’t invest from the first (or second) coffee meeting
3. Know it’s a process to get to know founders & funders
4. Investors are looking for green, orange & red flags, essentially, trying to de-risk their investments, looking for successes, risks, mitigations, inconsistencies, and areas for deeper discussions.
5. Investors through the coffee meeting want to know the "Essence of the Entrepreneur", so entrepreneurs, be yourself.
6. If there is a coffee meeting with a team of two co-founders, be aware that the investor is observing the team dynamics as much as the content being shared/discussed
7. Ask about their volunteer work. This showcases their values, for both investors and entrepreneurs. There might also be some connection points in those areas that make the coffee meeting memorable.
8. Discuss key differentiators of the technology and intricacies of the industry – I have personally seen that this completely ignites the founder & the funder (and other funders) when talking about an innovative startup. Why are you doing this? Why Now? What’s your unfair advantage?
9. Pay-it-forward culture for both investors and entrepreneurs as they sip on some coffee/tea to learn about an innovation, be curious about its formation and its scale, and if in the end, investment is made, perfect!

NUTS & BOLTS: DO'S and DON'TS

There are so many nuances of a coffee meeting, that there is probably a list a mile long about the do's and don'ts from both sides that I could go into. The lists here are from questions I receive continually from both entrepreneurs and investors when they need to have a coffee meeting.

FOR ENTREPRENURS:

FOR INVESTORS:

Aimed to demystify the sometimes intimidating coffee meeting, I hope that these insights do's and don'ts, best practices, and tips really help entrepreneurs feel equipped to SOAR when meeting with investors; and for investors to be more efficient and insightful when meeting with a founder over coffee. Follow up after your coffee meeting. I would suggest either using LinkedIn as a repository of messages or using a conventional CRM to track what you talked about. Follow up on connections you will make for them, data you will share, or information about your portfolio companies that would be beneficial for them and you. The reason why this is important as in any business meeting is the building of trust across the venture table. I find that when entrepreneurs are more aware of the investor's perspectives, they can become more successful in fundraising. Investors, when they are aware of the entrepreneur's needs & journey, there is more empathy. Therefore, we create a more informed funding landscape and innovation is invested in, and startups scale. It's a win-win for sure!