"Hey John! Give me a couple of names of VCs. I need a seed round and want to contact them right away, I'm running out of my savings!"
That's a common call I get from enthusiastic entrepreneurs.
Nothing wrong with it except for one thing: that first call will be your last unless you are prepared.
What does it mean to be prepared for a call to an investor to talk about your startup?
Try this dialogue to see if you can get what I mean:
SITUATION (dialing the phone for the tenth time after a dozen emails, the founder has finally gotten the great venture capitalist to answer the phone).
FOUNDER: "Hello Mr. INVESTOR. Thank you for taking my call."
INVESTOR: "Glad to, you had a fine introduction from Brad. What can I do for you?"
FOUNDER: "I have this great idea for a startup. I need a seed round. Here is what it is all about . . ."
INVESTOR: (Interrupting) "How much are you seeking?"
FOUNDER: "Well I haven't a specific amount in mind. What do you think is about right?"
INVESTOR: (Ignores answering) "What is this idea of yours?"
FOUNDER: "I was thinking that if somebody did XYZ . . .: (He talks rapidly, stumbling around, for about two minutes, mostly speaking in general terms about the idea, then stops after realizing the investor has been silent). "So what do you think about my idea?"
INVESTOR: (Again ignores answering) "Who else is working on this with you?"
FOUNDER: "It's me and a couple of techie friends so far. I worked for Google for a couple of years after school and quit last year to work in this. I thought you could help me find the people Ineed."
INVESTOR: (Again ignores answering) "Which of you has run a business before?" (He repeats the same question about marketing, business development and engineering leadership).
FOUNDER: (Responds with answers that reveal the startup has people with no managerial experience, have not managed profit centers or been leads in their field of expertise. In fact, most are solo contributors or students with modest working challenges).
INVESTOR: "Send me something in an email." (By now he is looking at his emails online, preparing to end the phone call.)
FOUNDER: "What do you have in mind?"
INVESTOR: "Send me a deck [he means PowerPoint slides] about your idea. I have to go now, thanks for the call. I wish you the best." (Click, the phone call is ended.)
That is how an unprepared founder gets treated by busy, sharp investors. In this case, the investor is being polite to Brad who did the introduction. The founder does not know that over the past four months the investor already has seen a dozen related ideas in the same general area. Two of those have impressed him enough to lead him to dive into research about the related market and competitors, especially potential startup competitors. The result is that our FOUNDER is supplying information and not knowing it, and is not very likely to be contacted again. The INVESTOR did not find outstanding management or idea or market or technology in the idea of the FOUNDER.
How could our FOUNDER have been prepared? Simple: by spending the time (ouch!) and effort (groan!) to write a solid business plan before making the first call to an investor. The result will include an Executive Summary of two to four pages. That is what should be sent to the INVESTOR, not a PowerPoint deck (which lacks the comprehensive words needed to enrich the idea and stir emotions of the reader). After that hard work the FOUNDER will be prepared with solid answers to any question asked by the INVESTOR about management, people, market size, ideal customer, competitors, strategy, unfair advantage, cash needed, when.
BOTTOM LINE: It sounds so easy to take a good idea to an investor, get some money, pay for yourself and some people to figure out what to do next and then build a great success. But my experience shows me the great startups are well thought out before anyone dials for dollars. That is how serial entrepreneurs do it. It is how they become successful, startup after startup. It is part of their unfair advantage. You can do that as well. I highly recommend it.
Think like the Boy Scout motto: "Be prepared." Then you'll have a much greater chance of success when you make your first call to an investor. When you do, you'll be like serial entrepreneurs. You'll have an edge over other startups looking for money. It will be your unfair advantage.
I wish you The Best on your Adventure!