Getting The Followup (Fundraising Part 2/3)

** This is part 2 of a series I'm putting together that distills how to get that next meeting when raising outside investor capital. If you haven't seen "Part 1 (Getting The Call)" yet, I'd start there**

Ok! So you've got that first pitch call scheduled. Odds are...well...you've already beaten them! Investors have limited time and yet they've decided that you are worth theirs. So let's make the most of that key first meeting as you'll soon discover the time absolutely flies.

Per our operating principle from Part 1, the goal of this pitch meeting is to get to the next meeting. Your goal is not to bombard that investor with information.

Remember, they are likely dealing with hundreds of pitch decks and anywhere from 20-50 pitch meetings per week, which may or may not even lead to a single check. Believe it or not, investors have an extremely difficult job. So let's make it easier for them by making the investor's diligence process work for you.

Enter: The Investment Memo.

What's the Investment Memo? It's the document that an investment firm uses to bring everyone involved in an investment decision up to speed as quickly as possible. It needs to be able to make the best possible argument for why you are worthy of the team considering writing you a check. Sometimes it's even used to reference to explain to Limited Partners why a firm made an investment. And, it's often initially drafted by a junior member of the team.

So what's your role in all this? The job of your first pitch call is simple:

Make the investment memo as easy to write as possible.

***NOTE: Every investment firm's memo template is different, but they do share commonalities. When I work with founders, I often make them write their own memos and use a template loosely based on one I learned from a structure provided by Initialized Capital . Here's my template. ***

In order to get that followup meeting and help ease the process of writing a great investment memo, you need to supplement the initial pitch you crushed in Part 1. But, before we get into the key elements of what needs to happen to do just that, let's review a few traps that are easy for any founder to fall into. Fall into a trap and you'll make the decision for someone to not write a memo that much easier.

• Pitch Trap 1: Rehashing Your First Pitch - Founders can easily get in the rut of giving their practiced pitch in calls like this wasting precious time. This DOES NOT mean you need to not reference anything you've already sent, but rather that you need to limit how you set your context. We'll talk about how to do this well later in a way that sets you up.
• Pitch Trap 2: Talk Too Much - This is the first chance an investor gets to hear you, in your voice, tell the story of what you're building. And most founders love to hear themselves talk (I know from my own experience as founder :) ) . Do your best to avoid this trap and outside of the ~ 7-10 minutes at most you'd use to tell your story in this meeting, let the investor steer things. This is not Shark Tank; what you don't see in Shark Tank is that the Sharks spend hours asking questions. Your pitch should be no different.
• Pitch Trap 3: Talking about the VC firm - A lot of VCs welcome the chance to answer questions about their firm and how they work. And for some reason firms will often start here. I can't count the number of times I've looked up from that line of questioning only to discover that half the meeting is gone. It's good prep to know something about the firm, but ultimately it's ok to say directly "I'd love to hear more about (insert firm), but let's just start with me sharing for a few minutes some information that can help supplement your understanding of what we're up to". Most VCs will welcome the directness.
• Pitch Trap 4: Overstating Traction - The temptation in this first meeting is to overstate how can't miss this investment is to create the sense of urgency. Investors are incredibly good at sniffing this out. Just don't do it. Example: $$## in your sales pipeline means nothing if it hasn't converted. Instead, fold traction into elements of your pitch without calling needing to call it out specifically. And definitely don't lead with it.

Ok so now you know what to avoid....let's talk about how to make the best of your limited pitch time. Assuming that you nailed your first pitch in order to get this call, here's how to supplement your argument in this one, keeping in mind the investment memo, in order to get you to the final step:

1. Distill Your Insight

This is the primary chance in your pitch to reset the context of what got you here and so it's ok to rehash a little bit of your first pitch's problem/solution sections. However, keep the focus on the insight that you explained in your initial pitch.

Investors know problems, but they remember insights.

Making your insight the focus of the beginning of this pitch helps remind the investor why they said yes to the call and also reminds them about how your background experience plugs in to the customer problem. Starting here keeps the focus here without distracting with extra information. Plus, if an investor decides to ask a question early, their question is almost certainly about the most important part of your pitch.

2. Demonstrate Customer Obsession

Your insights should immediately inform this next section, which is designed to show that you know your customer extremely well. There are lots of ways to do this well, but here are a few ways you can summarize your customer clearly and succinctly in order to arm the investor with the right information to write a great investment memo:

• What have you learned already about your customer? -->
• How has that informed your decision making?
• What do you know about your customer's alternatives?
• What do you know about your customer's "moment of awareness" in re: the customer problem?
• How are you minimizing the distance between that moment of awareness and the purchasing decision?

In this section, tell your customer's story and how you plug in. It's also a great chance for you to lay the groundwork for any meaningful traction you have so far with your desired segment, and, perhaps more importantly, how that traction informs the opportunity for scale.

3. Describe The Wave

I've heard startups described like surfing:

Founder = Surfer

Product = Surf Board

Market = Wave

We know that firms most often see their success from investing in waves. So you need to give someone about to write your investment memo the best possible description of the wave. Again, like demonstrating customer obsession, there are different ways to do this, but here are a few guiding ideas:

• Use the previous section on the customer opportunity to introduce the scale/size of the larger opportunity. If you're using numbers (and you should), be ready with citations.
• Quantify not only the market size, but also how things are changing. Investors are looking for momentum. Make CAGR your friend.
• Pay homage to defense-ability of your product, but don't pretend: a) that you are everything to everyone and/or b) that other's can't replicate what you do. Rather, explain how this growing waves plays into your strategy to grow. Show an investor you know how to paddle into the wave.
• Surprise them...particularly with a well-sourced fact about the overall market. And do your best to have that fact(s) reinforce your insight.

4. Demo/Explain The Tech

No investor will be under any pretense that your current tech is your ideal tech. But, you need to be ready to demonstrate how your current tech works. The reason I've got it listed fourth is that you can frankly fold that demo in to any part of your presentation.

But, be aware, that a demo invites a TON of questions and takes the focus away from the key elements (insight, customer, market size/wave). This is sometimes why I leave time for it after these first three pieces, particularly because by the time you've described everything else you're often teeing up the investor to ask "show me how it works!".

Your demo or tech explanation doesn't need to be extensive but it needs to cover:

• How you built it
• What's proprietary/unique to your team's skillset
• How you've limited user friction to utilization
• How you've created an efficient customer feedback loop

If you have these covered you've given an investor enough information to be able to describe the "what" behind your business well enough for an investor memo. Do NOT get stuck too deeply in the trap of saying what you're planning on doing unless they ask.

There are a million different ways that this first initial pitch can go, but the focus at this point needs to be on getting to that second meeting, which is often the minimum number of meetings an investor needs to make a call.

Keep your outline of the above 4 subject areas to <10 minutes (not including a demo) so that you can have plenty of time for investor questions. This means often having no more than 3-6 slides.

This DOES NOT mean that you don't have all of your other slides at the ready. You absolutely should still have everything that goes in a normal pitch deck, but you need to see that deck as the source deck for borrowing from depending on the circumstances of a pitch. Said another way, there is no such thing as a single pitch deck that you'll utilize, but rather a series of modular slides you can borrow/reshape at will.

A successful first meeting will NOT be dominated by reviewing your deck.

But, to get to that second meeting, an investor will need their team's buy-in and they get that with a really great investor memo. So your only role in this meeting is to make writing it as easy as possible.

However, don't miss the fact that this first meeting is also about evaluating you. Here are the four things that they'll likely be looking for:

• Can this founder sell?
• Can this founder speak clearly?
• Can this founder follow through?
• Can this founder be resilient?

Hopefully by working hard on the other elements of your pitch, you can demonstrate each of these. But, when reviewing your materials, make sure that you have clear opportunities to provide evidence for each of these questions.

It's a lot to get right, but you've already beaten the odds to get here and by designing your first pitch meeting to give you the best possible chance at a second meeting, you're well on your way to a check. In Part 3, I'll share some thoughts about how to bring it home!