Meeting One

Meeting One: How to Maximize the First Meeting with a VC

At S3 Ventures, we spend a lot of time meeting with entrepreneurs.  Often times, the very first meeting can be the most impactful. While each company is unique, over the years, we have developed a point of view as to what separates the best meetings from the others. Fundraising is an exhausting and time-consuming process for all involved, so it is our hope that by sharing our perspective, we can make your fundraising process a little easier and more efficient.

Goal of an Initial Meeting

As an entrepreneur, time is your most valuable asset. In our view, the goal of an initial meeting – or any meeting – should be for both parties to achieve clarity as efficiently as possible, so you can focus your time on where it really counts – on your business. With that in mind, we deem a first meeting successful for both the entrepreneur and investor if you achieve either:

1. A second meeting
   Fundraising is a multi-step process and the first meeting is just one step. If both parties are interested in spending more time with each other, you have successfully made it through the initial gate. Remember, you are evaluating the investor as much as they are evaluating you.

2. Fast clarity in the form of a “no – never” or “no – not now”
   If you are unable to get to a second meeting, the next-best result is to get either a quick “no” or “not now.” That way you have clarity as to how to best spend your most valuable resource – your time; you want to know if an investor just does not invest in businesses like yours, or if you should circle back in 6-12 months when you might be a better fit from a stage or risk standpoint. If you receive a “not now,” you will want to understand why not now and when would be a good time — based on specific KPIs or milestones.  If the investor is positive on your business, but it is not a fit due to stage or sector, do not be shy to ask for names (or even introductions) to investors who might be a better fit.

Achieving either of these outcomes efficiently comes down to the information you share and how you share it — the topic of the next section.

Key Topics for an Initial One-Hour Meeting

We get it: you have poured your heart, soul, and savings account into your business. In just an hour, there is no way to possibly get through all of the unique aspects of your product, market, team, industry, and vision. To make your first meeting successful and get to the second meeting, you must crisply focus on the highlights. Don’t worry – as you get further into the fundraising process, there will be plenty of time to dig into all facets of your company.

• Introduce yourself and your team (10 minutes).
  People are key to the success of any company. How did your prior experiences lead you to your company and equip you to make it uniquely successful?

• Define the market problem and your solution (15 minutes)
  Companies exist to solve problems. We want to be able to understand what problem you are solving, how valuable solving it is, and the size of the addressable market. We also want to understand why this problem has not been solved before and why your approach is unique and better than other approaches.  Depending on the complexity of the technology underpinning the product, we would like to understand your technology at a very high level as well (2-3 minutes).

• Explain the sales and go-to-market model (15 minutes)
  Acquiring customers efficiently with healthy gross margins is key to building a successful business. Different metrics apply to different types of businesses, but in general, we want to understand unit economics, customer acquisition costs, sales models, product pricing, and product margins. In addition to the future plan, we also want to understand where the business is today. Data such as your current revenue and gross margin, number of customers, how those customers were acquired, and your sales pipeline are typically very helpful. We generally do not invest pre-revenue in business technology companies (other firms certainly do), but we may do so in medical device companies at clinical stage.

• Plan for operating and scaling the business (10 minutes)
  What is the plan to scale the business over the current and next year, by month, and what milestones will you accomplish?  How much cash is needed to accomplish each of the milestones? Who are the key hires? If you do not already have an operating plan, feel free to build one using the template on our website (link).

• Fundraising process and your expectations of an investor (10 minutes)
  Are you just starting the process? Or do you have a term sheet from another group and are looking to round-out the financing? What are you looking for in your investor? Spend a few minutes getting in-sync on the process and next steps, so time continues to be used efficiently.

Everything Else VCs are Evaluating

If we move forward with an investment, it means we are planning on working together for as long as a decade or more. In addition to better understanding your company, we are assessing if we might work well together; and we expect you will be doing the same. To that end, here are a few key traits we seek out in entrepreneurs and management teams (and strive to exhibit in ourselves as well):

• Know Your Audience
  Do your research on the investor. Check out their current and past investments, as well as their investment criteria, sectors, and themes (usually available on their website), and have an idea of how you align with their strategy. If there is a particular individual at the firm that has exhibited an interest or history of investing in your area, you will want to get to know that person. If you fit their broad thesis, but you are at an earlier stage then they invest, you may want to focus the meeting on building the relationship, getting advice, or accessing their network — versus asking for an investment. Also, there could be a business development opportunity with one of their portfolio companies.

• Listen Well
  The best teams we have met made an extra effort to listen to their customers, their investment partners, and each other.  We have found that, as amazing as it sounds, customers will often tell you exactly what they need. Listening does not necessarily mean agreeing – but demonstrate that you understand questions and feedback and can launch into a productive, fact-based discussion.

• Be Flexible
  We know there is a story that you want to tell and have likely told hundreds of times. But we also want meetings to be a dialogue, not a monologue. Be prepared to adapt to and answer questions, even if it throws your presentation out of the planned order. Seeing how you respond to such situations provides a window into how you work with customers and investment partners.

• Trust Your Team
  When there are multiple members of your team present, we want to hear from them too – especially when discussing topics that they are most familiar.  Team dynamics are key to success in any business – but especially critical in the early, high-stress days of a startup – so investors are highly mindful of how your team contributes and interacts during meetings.

• Know What You Don’t Know
  “I don’t know” is an acceptable answer to many questions. No one knows everything, especially in the early days of a startup.  Honesty and openness are what we are looking for in an entrepreneur partner.

Final Thoughts

Starting a company and raising funds is hard. In a multi-year, often very intense experience with your investment partner, you will want someone with you that is rational, calm, thoughtful, experienced, measured, and forthright. Pick your partners well. Do your own reference checking on potential investors. The fundraising process will take time, many conversations, and can often be frustrating, so be prepared for that. Remember, a “no” from an investor does not necessarily mean you have a bad business; it just means it is not a fit for that particular investor. Even if you get a hundred investors who say “no,” it only takes one to say “yes” to get your business funded, so keep persevering. 

While our goal is to invest in great companies that fit within S3’s focus areas, unfortunately we cannot invest in every great business, and there have been plenty of opportunities that we have missed. We want you to succeed regardless of who funds your company and hope that you will enjoy the journey.

If you have suggestions on improving the template, please contact us.

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