It’s easy to get caught up in the moment when you get a chance to pitch a VC. Don’t. Slow down and ask these two questions:
What does your fund invest in?
Listen. Listen for NOT YOU. You won’t want to hear it, but most VCs have a plan for how they invest and are not likely to deviate from that plan. Most VCs are professional investors and being professional means having a plan and sticking to it.
What size checks do you typically write?
Again, Listen. Listen for too big for you. Again, remember you are dealing with a professional investor. You are not very likely to change their plan.
So… Now you know. The VC you are talking to doesn’t invest in fill-in-the blank companies, and you are exactly a fill-in-the-blank company. They also write minimum checks of $10m and you are looking for a round of $5m. Your chances of winning the lottery may be higher than getting an investment.
So here’s the $5m question: Do you pitch or not?
The answer to the test: C… None of the above.
Ask one more question. This is actually the real $5m question:
Ms. VC, my company is looking for half of your minimum investment, and we don’t fit your firms portfolio. If I share with you what we do, and our capital needs, would you be willing to refer us to someone you know where we might fit?
Usually the answer is yes, and my experience is a VC that can’t invest is one of the most powerful referrers you can have. Why?
First, you are likely to get referred to an investor who fits your company and capital needs! VCs are usually serial networkers and are very thoughtful when they make a referral.
Second, the investor getting the referral knows a bigger VC is aware of the deal and thought highly enough to make a referral. This small signal has value.