Understanding the questions behind a VC’s questions: Part 6 — Is it a match?

This is the last post in a series on VC questions. To start at the beginning, please click here.

There is no i in team, unless you are talking investment

There are two sections from Brad’s post that apply to the entire curve

a) Team

b) Fit with the fund

Team:

Once an investor understands the business and has formed conclusions about the biggest potential pit-falls, the next step is to identify the members of the team who have experienced similar challenges in the past and learned from them. When practicing your presentation around team, try to match the strengths of your team with the areas of concern or weakness in your plan. Your investor knows that you will need to adjust along the way. The strength of the team is the key to identifying the proper time to adjust and the new path to follow. The discussion of the team is also a time to show your prospective investor that you know what you do not know and a plan for the learning process.

WHO IS YOUR MANAGEMENT TEAM?

-Who is the management team?

-What is their experience?

-What pieces are missing and what is the plan for filling them?

[caption id=”attachment_254" align=”alignleft” width=”300" caption=”The numbers may be a waste of time, but the calculations are not”]

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Fit with the fund:

As a founder the most valuable resource you have is time and fundraising can be a massive drag on this resource. It is extremely important to maximize the efficiency of this process and select potential investors to target based on a sense of how well your company fits with the fund. This includes understanding the portfolio as a whole, the specific investments that a given investment professional is involved with and the expertise of a firm or specific investor. Understanding of the shape of your curve and a sense of how close it is to other investments that the firm has participated in historically is a good filter as well. This analysis starts (and often ends) with an answer to the question, “How much are you looking to raise?” Brad’s list on fit is below, and I have added one to the end.

HOW DO YOU FIT WITH THE PROSPECTIVE INVESTOR?
- How does this fit w/ the investor’s portfolio and expertise?
- What synergies, competition exist with the investor’s existing portfolio?

-**Does the shape of your curve match those of the investor’s existing portfolio?

Friends who read this blog have told me that this series is too wonky and that what is really important is great entrepreneurs with big ideas. It is also true that at the early stage where I focus my time at First Round, every number in a financial projection is going to be wrong — either high or low — and so detailed projections are often a waste of time for founders who could be focused on building cool product. While this is true, ultimately the investor is buying shares in a company, not the consumer product or service and must believe in your ability as an entrepreneur to deliver a shape that fits the fund by focusing your energy in the space you have chosen for your innovation.