Master List of Tips and Hacks on how to successfully communicate with investors.

Proven Strategies and Pitfalls to Avoid in VC Communication with Investors

Master List of Tips and Hacks

1. Delivery: the pitch
2. Deck and materials
3. Be ready to spend $: Milestone-drive Investment Budgeting
4. Lead Investor vs. Others
5. Blueprint of a (fundraising) round
6. Questions to ask investors
7. Answering tough questions
8. Trends and Hype
9. Useful Tools

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1. Delivery

This refers to your presentation and pitch. Whether that is a phone call, in-person, or a video conference — you have to perform excellently. There is rarely a second chance, I am sorry.

Tips:

Your Communication skills should be top-notch. and, communication is a two-way thing, so:

• Listen and observe, read the body language.
• Never speak for longer than 2min. Everything goes in 2-minute intervals and the pause — lets them ask questions.
• Showing that you are Coachable is one of the most important traits that investors are looking for.
• Other equally important traits that you want to demonstrate are cooperability, leadership, hustle, and a high degree of intelligence.

Your Attitude (and Look’n’Feel) Should Be:

• Confident (and visionary)
• Energized (excited about the business opportunity you are tackling and the sheet potential of it!)
• Not in a good mood, but in a GREAT mood!
• Kind and friendly (aka — cool).

What will significantly impact your perceived quality are:

• The way you lay out answers (read above — short, concise, in a 30-minute or less meeting NEVER speak for longer than 2min!)
• Questions you are asking
• The design, structure, and quality of your materials (everything from your deck, to your website, product page/app, follow-up email, data room, financial budgeting, sale forecast…)

2. Deck + Materials

This is one of those topics widely covered so I am keeping it brief.

There are a few types of decks:

• Teaser deck (also called a summary deck or short deck) — is sent before the meeting. Don’t forget, there is only one goal that this deck serves — to get you a meeting.
• Presentation deck — you use it to present your company, typically after the first or second meeting. Besides some data-filled slides, I would strongly argue that this deck should have no words but only slides with images — to tell the story.
• Extensive deck (also known as reading deck, long deck, or detailed deck) — this is what you would share only with the investors who express a real and tangible interest in investing. Typically, this deck would be in your data room.

A quick reflection on that Teaser deck (generally the most challenging to make). My tips:

1. Make it concise, 1–1.5 min reading time for the entire deck.
2. Keep it clean, more unfilled space in slides than content.
3. It has to be professionally designed. If you are not a designer, then hire one. An average investor will see around 200 decks every week! They have developed a strong preference for splendid decks, hence the best-designed ones will stand out.
4. Deck is a living document and it will change over time. You will probably have 50 versions by the time you have gotten your first term sheets.
5. For sharing only use DocSend or a similar tool. NEVER send attachments.

This is a sample from my DocSend stats to show you that it’s a minute-long read on average.

3. Be ready to spend $: Milestone-drive Capital Requirements Budgeting

You would be surprised by how few startups are truly ready to use the funds that they are asking for.

“We are planning to hire 10 people” — while not even having an HR person or having had interview anyone for any of those 10 positions.

Hiring is hard and it takes time. The same goes with many other things so get ready for it all.

If you are coming to me (let’s assume I am an investor) and you tell me that you need $400k to buy some machine for your production, you should have already found the machine and got a quote for it. The same applies to everything else.

For planned key hires, it would be ideal to see that you have published JDs (job descriptions), received applications, reviewed resumes, went through a few interview stages, maybe even made offers, and agreed on a compensation and start date. That is what it means to be ready to spend money $!

Founders rarely make reasonable and constructive budget that is tied to milestones.

Milestone-driven use of funds

It is about more than how much money you want to raise but about what you intend to achieve with that money!

Prepare a budget that is tied to achieving strategic milestones.

Example

Tips

Include new hires

• Title — responsibilities — goals — JDs
• Profiles (with resumes): these are the people we interviewed
• Compensation — start date

4. Do I need a Lead investor?

It’s all about the lead….The fundraising game tasted bitter. One of the key bitter ingredients is that questions 99% of investors will ask you:” Do you have a lead?”

Let me get this clear in a few words. Some funds lead and the ones that follow.

To explain in detail would take another blog post so I will only say that when raising venture capital funding as a startup, having a lead investor is crucial for several reasons. Firstly, the lead investor typically provides validation for other potential investors, signaling confidence in the startup’s potential and reducing perceived risk. Additionally, the lead investor often sets the terms of the investment round, including valuation and governance structures, which will streamline the fundraising process by providing confidence for other investors to join the round.

Not having a lead investor means that it will be super difficult to put a larger round together.

So — for your A-type investor you are looking for the funds that lead. Until you find a lead, I would say, try not to meet anyone else. Focus all of your energy only on meeting lead investors first.

Of course, you can raise a round without a lead investor by raising it on a rolling basis.

Raising on a rolling basis, also known as a rolling close, is a fundraising strategy commonly used at the Pre-Seed and Seed stages. Instead of setting a fixed end date for the fundraising round, you continuously accept investments from investors, over a period of time, until it reaches its funding target or you decide to close the round.

This approach will allow you to maintain flexibility in your fundraising efforts and (most importantly) avoid needing a Lead investor.

Rolling closes is AMAZING for creating a sense of urgency among investors, encouraging them to commit earlier to secure their desired allocation before the round closes.

Tips

#1 -> Adjust your ask to the investor. Have different budgets based on the milestones (each is in a different version of the deck).

Angels that can invest $25-$50k should not be pitched a $1mil raise but a milestone raise of $500k<!!!

#2 -> First check-in gets better terms. That goes on for the first few checks. The last investors coming into the round get the highest valuation. This is the way to battle the “waiting-by-the-sideline” investor attitude where rarely who want to be the first check-in.

5. Blueprint of a (fundraising) round

There are two parts to this chapter:

5.A. Making a Momentum

8.B. The power of network effect

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5.A. Making a Momentum is paramount

Let me tell you a story about momentum. Think of momentum as a fast boat. If investors were passengers looking for the quickest way to reach the other shore, they would naturally want to board the fastest boat available. Typically, the fastest boats are the smallest speedboats with a limited number of seats. You want to be the fastest boat moving at the speed of light. Sales are growing, key metrics are exploding week-over-week, and you have most of the round committed. Your boat is moving at a rapid pace, nearing its destination — the closing of the funding round. This is the feeling you want to evoke, compelling investors to compete for a seat on your speedboat!

Creating momentum in raising funding involves strategically generating interest and excitement among potential investors. This can be achieved through various means, but the effective ones are:

a) showcasing great growth

b) securing commitments from reputable investors or strategic partners,

By building momentum, it is more or less the only way to put pressure on investors to respond and act. Momentum is your golden tool to increase the likelihood of securing funding, and potentially negotiate more favorable terms for their fundraising round.

How does it look in real life — please check this wonderful series of tweets for more info: https://twitter.com/dunkhippo33/status/1352734147438022656?s=20

5.B. The power of network effect

Don’t underestimate the power of small cheques $!

There is a brilliant blog post written by Freshpaint where they provided a detailed analysis of their fundraiser. The entire write-up is incredible but I’d like to point your attention to the middle part titled “Some Learnings” — A mapping of where their investor checks came from. Brilliant.

(insert their chart below):

Circle = angels, Square = VCs.

Blue = leads from our network,

Red = inbound leads,

Black = warm intros or Demo Day leads.

Lessons:

- Your job is to find the believers, not to convince the non-believers

- Don’t underestimate the power of small cheques $

Masterlist of key tips + more of DOs and DON’Ts

• Do your research beforehand: Google the person & look at Linkedin, Crunchbase, YouTube, X.com, etc.
• Show that you are “coachable”
• Follow up with investors when you say you will and ALWAYS do it within 24hrs! No excuses! You would be surprised by how many founders are not diligent in their follow-ups!
• It is not only about answering their questions; this is a two-way conversation.
• Control the meeting. You don’t need to answer all the questions, especially the ones that are distracting from what you want to pick.
• Say NO to special requests. No complex modeling or in-debt market research unless you are already a few meetings down in negotiations with a lead investor, even then — make sure that they are truly interested before you go on and put in those extra hours.
• Avoid name-dropping: Don’t share the names of other investors (
• What is the Elephant in the room? — addressing the ?? in the room should be first thing in your opening of a meeting. Having lost a co-founder, a major customer, or a partner. You better bring it up first to avoid being asked about it.
• Make sure you have the Investor Packet ready for sharing: everything that an investor will want to review: performance analytics, extended deck, data room, etc.
• They are testing you as a CEO and only half care about your story
• Listen to motivational talks or upbeat music, drink coffee, run laps, or do whatever it takes to get you pumped to show up with HIGH energy and in a great mood!
• Be honest.
• If you go for a coffee with an investor, offer to pay or go early and pay for your drink.
• Get everyone to a YES or a NO quickly. NOs are great — the worst is when people don’t respond/are in between. In-between / no response is a 99% NOT.
• If you’re meeting was good (usually they will ask for terms and you’ll know that they are interested), I‘d say “Marc, I’m glad you are finding interest in what we’re doing. I think you’d be a (tremendous) add/love to have you on board if you’re interested…” — “Can I count you in?” Don’t hesitate to ask, be pushy!
• Keep investors in the loop about progress. Weekly or at the very least bi-weekly updates re: progress on fundraising (you can polish these numbers). Investor updates should feel personalized.
• HIGHLY recommend pitching with a deck to stay on track but of course you have to be prepared to pitch without the deck anytime, anywhere.
• ABOVE ALL — Make fundraising a FULL-time job.

6. Questions to ask investors

• How big is your fund?
• Do you lead rounds?
• Where are you in your fund — are you deploying capital? When will you need to fundraise again?
• How many investments did you make/ are intending to make this year How many seed deals have you done in the last 6 months? How many seed deals do you anticipate doing in the next 6 months?
• Who is involved in your decision-making process?
• How long does your process typically take? and what are the steps?
• Who is the decision maker?

By the end of the meeting, you should understand all of the below:

• Their decision-making process;
• What are the issues with your business in their eyes;
• What the CONCRETE next steps are.

DO NOT LEAVE WITHOUT A CALL-TO-ACTION AND AGREED NEXT STEPS.

7. Answering tough questions

Prepare to answer ALL the questions possible:

○ What are your performance projections (e.g. CAC and LTV)? What is your key growth metric today and how will it change over time?

○ What do you know that others don’t? Why are you the right person/ team/ company to succeed?

○ Why did no one make this (what you are intending to do) already?

○ How did you size the market?

○ How much you are raising and why?

○ What your cap is? What valuation are you looking for?

○ What you are looking for in a lead investor?

○ When are you closing?

○ Whether you are raising an equity or a convertible note round?

○ What happens if you cannot raise the full amount?

○ What is your planned exit path? Why?

○ Who will be your first five hires? Why?

Tips to answering ‘tough’ and important questions

Question: How much are you raising?

— Don’t pick arbitrary numbers e.g. $1M. The right number is = the amount needed until you hit your milestone (+ buffer in a multiplier to account for any errors and unforeseen circumstances). E.g. Have at least 18 months of runway: 12 months to achieve set Milestones with 6 months of cash left to fundraise or as a buffer.

Answering questions

• Poor answer: “I want to hire some engineers.”
• OK answer: “I’m using half of it for growth.” (still meh)
• Best answer: “We’re raising X for growth. Based on our customer acquisition experiments, if we pour Y into this process, we can get to Z in the next 12 months. I have persons A, B, and C, who are eager to come onboard.”

*If you are < 6 months away from running out of cash, you need to start your process NOW.

Remember, you are not raising from VCs for growth but to accelerate the growth!

Question: What happens if you cannot raise the full amount?

• (This question tends to freeze CEOs!) If you have prepared a Milestone-driven budget for the use of required capital, you can justify that securing fewer funds than the total raise might be enough to fund achieving one of the milestones. Being able to take in less than the full amount and accelerate growth is the answer investors want to hear.

Terms — I would not be greedy on valuation. <$5M Caps for pre-seed are market right now> — it will be hard to get investment in the follow-up rounds if you push up your valuation early on.

Bad signaling:

• When you’ve raised $1.5M and now you are raising $500k
• Get trapped in no-(wo)man’s land without a lead and out there in the market raising for more than 3–4 months…

8. Trends and Hype

In the realm of investment, trends can be both everything and nothing at the same time. It’s crucial not to get caught up in the hype. Today’s hot sectors for investment include AI and Cleantech, but historical data shows that significant returns often stem from areas outside of the hyped and trendy segments. For instance, when Facebook emerged in 2004, the prevailing trends revolved around smart fridges and RFID technology.

Andreessen Horowitz and Kleiner Perkins launched a dedicated Google Glass fund in April 2013, certain that “developers will create thousands of ways for millions of people to use Glass and improve their lives and the world.”

In a remarkable tale of perseverance, Brian Chesky, the CEO of Airbnb, faced numerous rejections when attempting to secure their first investment. Despite having over 100 meetings with potential investors, Chesky encountered skepticism and reluctance. Not a single investor saw a promising future in the concept of sharing apartments, casting doubt on Airbnb’s viability.

However, amidst the sea of rejection, Chesky and the crew found a beacon of hope in Paul Graham. Today, Airbnb is $95 billion and growing…

This inspiring anecdote is vividly portrayed in the captivating book ‘The Upstarts’ — highly recommend checking it out!

9. Useful Tools (and $ budget)

Fundraising tools:

? DocSend ($15/mo)

? DocuSign ($20/mo)

? Dropbox or DocSend for Data room ($20/mo)

? Crunchbase subscription ($299/ annual) — $$$ sucks but it’s more or less mandatory to have

? Email newsletter (maybe required)

? Notion ($12/mo): CRM + Task tracker, docs/briefs

? Discord ($11/mo) for team comms (or Slack) or WhatsApp as a free alternative.

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Thank you so much for reading. If you enjoyed this story I would appreciate sharing this post. It is more than welcome and it would mean a lot if you spread the word with others.

Thank you,

-Janko