It is too early to determine whether SVB’s demise heralds a new era for venture capital, but based on anecdotal evidence, off-the-record discussions and chats with colleagues, it appears we’re back to business as usual, where fundraising before revenue start-up has been delivered.
Not a scientific sample, but several investors said on Twitter this week that they remain interested in talking to founders who are still in the ideation phase. My hot take: With contagion under control, the VC community feels good about writing small checks for upfront monetization startups, but Series A and above? More than mean.
As long as this downturn continues, this Q&A for investors will be a monthly TC+ column. If you’re a recently laid-off employee considering going on strike on your own, an H-1B employee who’s having a blast, or just looking for tips and advice that can help you connect with early-stage investors, please read and share.
Thank you so much to all the investors who took the time to answer these questions in such detail! If you are a budding investor who would like to be featured in future columns, please email guestcolumns@businessroundups.org.com with “How to pitch me” in the subject line.
Here’s who participated:
- Brian Backeengeneral partner, Lightship Capital
- Masha Bucher, founder and general partner, Day One Ventures
- Rebecca Liu-Doylegeneral manager, Insight
- Clelia Warburg Petersmanaging partner, Era Ventures
- Nick Adamsmanaging partner and co-founder, Differential Ventures
- Lisa Lambertfounder and president, National Grid Partners
- Elizabeth Yinco-founder and general partner, Hutle Fund
Brian Backeen, Managing Partner, Lightship Capital
What kind of investment opportunities are you looking for in March 2023?
Like many investors, we are optimistic about AI. We made two AI-related investments in April and continue to look for opportunities in that area.
How do you prefer to be approached by a founder with their first pitch: a cold email, a warm intro, or some other method?
We have an online portal on lightvessel.capital that founders can use to request investments. We do that to avoid a problem with VC investors called “network bias.” Founders need to sign up on our portal and follow Twitter.
What is a traditional fundraising tactic that founders should remove from their toolkit – something that no longer works but is still a common practice?
Soliciting warm intros and trying to “build a relationship” with investors. Spend your time building a great business and you will earn investment. I don’t need new friends.
Tell us about the best pitch you’ve received recently. During their presentation, when did you realize you were going to invest?
I was recently pitched by a firm called MuseTax. Excellent founders, subject matter experts, the real deal. They made me want to invest in the first 10 minutes. They are zealous now.
Can you give one piece of advice that will help a budding founder stand out?
Don’t focus on investments; focus on design. Don’t let your engineers build you an ugly product with a great password reset feature but limited user value.
Don’t let the engineers tell you it’s not done yet; it is. Push it out and learn.
Design it well and users or investors will follow. Design the first draft well and you get a lot of technical bills and no progress.
What are you reading/watching/listening right now?
I keep rewatching season 1 of “Billions”. You know, before it got weird 🙂. Great performance.
Masha Bucher, Founder and General Partner, Day One Ventures
What kind of investment opportunities are you looking for in March 2023?
In a healthy fundraising environment, the founders who do the best often lean on their storytelling prowess and can win over investors with their charisma. They are the ones who are good speakers by nature and who can articulate their vision well.
There is a second type of founder with a different background. They are often stubborn, sloppy and resource-oriented. I call them “survivors.” Survivors are often immigrant founders, people of color, women, or others from underrepresented backgrounds.
I believe the survivors are the kind of founders to lean on during a recession. They are forced to be sloppy and survive all their lives; they are specially equipped to handle what the current times demand of them. They are good at making something from nothing and are extremely cost efficient.
I am looking for ways to generate revenue, business models and paths to profitability. Investors pay much more attention to numbers, business models and how well founders manage finances. Expect many more questions challenging the business model.
I look at how much revenue comes from product quality versus marketing. Founders who generate virality based on the quality of the product show that they can make money with little marketing spend.
We like companies with high EBITDA. We love companies like Quinn, who have grown into millions in revenue with viral, free marketing on TikTok in just a year from launch.
How do you prefer to be approached by a founder with their first pitch: a cold email, a warm intro, or some other method?
Cold email works great, but it’s surprising how few people can get it right. In a cold email, every sentence should convince me to attend a meeting. With every word and phrase, you should arouse an investor’s desire to meet you in person. You must show a clear reason why they should meet you now, not next month.
