VCs rarely go into an entrepreneur’s pitch meeting with a completely open mind. Of course they have biases given their past experiences, like with any human interaction. More importantly, though, they have biases about whether or not they are going to find the opportunity attractive even before a word of the dialog has been spoken. VCs have a fond saying about “wanting to like it” when they’re introduced to a new investment opportunity where many conditions of their so-called pattern recognition are satisfied prior to hearing the story. On the negative side, many VCs often take meetings (out of “courtesy,” for education purposes, etc.) when they know a priori they have no intention of investing.
There’s been a lot of spilled ink in the blogosphere about getting the right introduction to a VC, and the signal value that’s associated with the right person facilitating that connection. Yes, there’s a real message in who makes a specific introduction, but I personally think that attribute is over-valued. Either an intro is from an extremely trusted source and a VC will pay specific attention, or it’s from a respectable source and a VC will take the opportunity at face value… I don’t think there’s much signal in the greys in between.
More subtly, however, there are a myriad of smaller items which affect how a VC feels about a potential investment before even going into the meeting:
- Interactions over email (and with an assistant).
- First glance at the website (or lack thereof).
- Quick flip-though whatever materials are included in introduction (or again, lack thereof).
- Internal point-of-view on a specific space/category. For example, I know some firms which systematically won’t do anything travel or dating-related, but will still take meetings. Or, some firms have very specific theses about particular spaces and are actively seeking companies which fit into those maps.
- “Profile” of the entrepreneur or company – first-time or experienced, background, graduating(/ed) from a particular accelerator, etc.
- Whether he’s “heard” of the company prior to getting together. This includes both his perception that it’s “hot” through PR or VC scuttlebutt, as well as if he believes the investment opportunity has been “shopped around.”
- Where the company would “fit” well into the firm’s existing portfolio, filling in gaps from a stage or sector standpoint.
- Knowledge about the (existing or future) syndicate composition or other deal dynamics which are favorable or unfavorable.
- How much board-level capacity the individual partner has remaining – is he overloaded with board commitments or is he in investment-seeking mode?
The above list is illustrative but in no way intended to be exhaustive. The point is that some of the above factors are within an entrepreneur’s locus of control and some of them are certainly not. (At NextView, we deliberately aspire to go into each entrepreneur conversation with a “blank canvas” perspective, one of the stated aspects of our firm’s ethos.) The takeaway is for entrepreneurs to recognize that before an opening slide is even shown, a VC has begun to form a point-of-view of whether it’s an attractive investment; and by attuning to any intangible initial signals in the opening dialog, modify the pitch accordingly.