After attending TechCrunch Early Stage last week, I was cheered to meet so many first-time founders and experienced investors who are looking for opportunities. Based on my conversations, VCs are very open to working with novices who can show that they understand the market in which they hope to compete.
But deal-making is idiosyncratic: A few investors might be content to make a deal over coffee, but early-stage teams still need a sturdy pitch deck or memo they can leave behind. Similarly, one VC may encourage newly minted CEOs to eat ramen and ride the bus, while another might suggest a salary in the low six figures, depending on geography.
I asked five early-stage investors to share frank advice for first-timers, and I’m going to save you some time: Many (if not most) of you are probably not ready to pitch an investor.
If you haven’t already spoken to scores of customers or created a contact spreadsheet with at least 25 investors who’ve backed companies like yours, it’s too soon. And if you’ve added “AI” to your pitch deck only to make it more appealing, here’s some more bad news: FOMO is passé, and due diligence is the new black.
In keeping with our format, these VCs explain what kinds of deals they’re looking for, how they prefer to be approached, along with some straight talk about bull-market fundraising techniques that no longer apply today. Their answers were edited for length and clarity.
Thanks very much to everyone who took the time to respond! If you’re an early-stage investor who’d like to be included in future columns, email guestcolumns@techcrunch.com with “How to pitch me” in the subject line.
Here’s who participated this month:
- Rudina Seseri, founder and managing partner, Glasswing Ventures
- Patrick Salyer, partner, Mayfield Fund
- Josh Constine, venture partner, SignalFire
- Alexa von Tobel, founder and managing partner, Inspired Capital
- Oren Yunger, partner, GGV Capital
Rudina Seseri, founder and managing partner, Glasswing Ventures
What kind of opportunities are you looking for in April 2023?
This year has seen massive attention paid to AI, specifically generative AI. Still, the fact of the matter is the current attention only covers a fraction of the full breadth of the opportunity. AI is far broader than the buzz would even imply! We invest in startups leveraging the immense breadth of AI to solve critical business problems.
Specifically, we are spending time developing our theses around and seeking founders building the next generation of cloud/computing infrastructure, industry 4.0 and intelligent verticals, the augmentation and automation of software development, and applications and infrastructure around generative AI.
Many workers who’ve been laid off recently are thinking about starting up their own companies. What’s one important thing they should know before pitching investors for the first time?
We look for founders to demonstrate how to apply the right techniques, with the right data, to the right problem. Just saying your product is AI-driven will not cut it. You can expect that we will go deep into understanding your technical approach and product differentiation.
From a general perspective, in your initial meeting with an investor, you must communicate why the problem you are tackling needs to be solved and why you are the right person/people to solve it. A compelling way to do so is via the business’ origin story. This should include how you identified the problem, the value of a solution and why your team is uniquely positioned to solve it.
Additionally, upon raising early-stage capital, your first job will be to hire top-notch employees. Your ability to “sell” a compelling opportunity to join your business is a vital founder characteristic.
How do you prefer to be approached with an initial pitch: a cold email, a warm intro or another method?
A warm intro, particularly through a founder or colleague, is almost always the best way to connect with an investor. If you cannot find a warm introduction to an investor who is proactively seeking to fund outstanding entrepreneurs, how are you going to win customers who are inundated with vendors seeking their business?
That said, I review everything in my inbox and can be reached at rudina@glasswing.vc. Also, remember to be intentional in your outreach, as it will save us both time in identifying if there is a potential fit.
How much salary should the CEO of a pre-revenue startup take? Would you back a founder who has a second job?
It is difficult to quote a specific number for salary, as that is a combination of the level of financing the company has raised, the experience of the CEO and their financial obligations.
Most importantly, the compensation of a startup CEO should be a holistic conversation between the board (often your lead investor acting in their capacity as a board director) and the CEO. Trust, respect and transparency must exist such that the conversation can happen. The wrong approach to compensation is to name a specific number without context.
Being a founder is an intense job; it’s all-consuming and often equates to having 1.5 to 2 jobs, so the notion that you can do it part time is just not realistic. We expect a founder to be full time on what they are building at the time of investment.
But, of course, part of my job as a board director and investor is making it feasible, as it is essential for maximizing the business’ success. Building a company is a full-time (and then some) pursuit.
What’s one traditional fundraising tactic founders should remove from their toolkit — something that no longer works but is still a common practice?
I still frequently receive inbound requests from founders who are either out of strategy for my firm or who do not effectively communicate the opportunity to work together convincingly. There are more venture funds than ever and increasingly more specialized funds. Before reaching out to a prospective investor, diligence is critical because today, more than ever, there is likely a firm that is an excellent fit for what you are building.
Notably, this goes both ways. When we reach out to a founder of potential interest, we hold ourselves to the bar of being thoughtful, prepared and able to articulate to a founder why we believe there is a potentially valuable opportunity for us to work together.
Are pitch decks still necessary? Have you ever signed a term sheet without reviewing a deck first?
Even at the first-capital-in stage at which we invest, where a company is pre-revenue and often pre-product, a pitch deck is valuable in guiding the conversation and serving as reference material in the diligence process. In addition, building and iterating on an effective fundraising deck can serve as a framework for thinking and addressing important questions in the early days of a business.
With that in mind, I have never issued a term sheet without a presentation of some form outside of an incubation. As incubating investors, this is part of the company formation and ideation phase of the business. Many of the questions that are part of creating a fundraising deck are developed and addressed alongside a founder.
Tell us about the best pitch you’ve received recently: At what point did you realize you were going to invest?
One pitch that comes to mind is my first meeting with Thouheed Gaffoor, co-founder and CEO of Basetwo. In meeting Thouheed and each member of his founding team, what stood out was the high level of credibility and domain expertise.
As part of our diligence process for every investment, we speak to dozens and dozens of end customers regarding the potential of investment, both users and budget owners. We knew we wanted to invest in Basetwo when, in the case of those prospective customers, they started asking us when they could get their hands on the platform.
Please share one piece of advice that can help a first-time founder stand out from the rest.
Do not be afraid to say “I do not know” when asked a question by an investor. In the early days of building a business, there are, by its nature, questions for which the answer is unknown. Part of business building is answering those questions.
One of my favorite answers to receive is, “I do not know, but I am going to find out by…”. If you provide a thoughtful answer for how you will answer an unknown, and that unknown is stage appropriate, a good investor will not fault you and should appreciate and value your response.
What are you reading/watching/listening to right now?
I am currently rereading the Foundation series by Isaac Asimov. It frequently reads as a timely commentary on the challenges of the day despite being published in the 1950s. One of the series’ key themes is social change, specifically how it is predicted and controlled and the role of technology.
Asimov raises important questions about social and political upheaval that are equally applicable today in the real world as in the fictional world.
Patrick Salyer, partner, Mayfield Fund
What kind of opportunities are you looking for in April 2023?
We are actively looking to lead new enterprise software investments, at both inception and Series A stages. Some areas we are excited about include artificial intelligence, data, dev tools, security [and] fintech, among other areas. Also, we invest across all parts of the enterprise stack, including applications, middleware and infrastructure companies.
Many workers who’ve been laid off recently are thinking about starting up their own companies. What’s one important thing they should know before pitching investors for the first time?
Before pitching investors, founders should talk to customers — not just a handful but tens or hundreds of customers. This will provide all the context, clarity and conviction required to speak to investors.
How do you prefer to be approached with an initial pitch: a cold email, a warm intro or another method?
As a former enterprise software CEO-turned-VC, I have a tremendous amount of respect for well-executed cold email outreach and welcome it. That being said, in Sales 101, what converts even higher than cold outreach is a warm intro, so that always is a better route (but not required)!
My email is patrick@mayfield.com, or check out my Linkedin profile to see who we have in common and get a warm intro!
How much salary should the CEO of a pre-revenue startup take? Would you back a founder who has a second job?
Here I might take a softer stance than other VCs because I’ve been a startup CEO myself. Startup CEOs should have a sufficient “living salary” to take care of basic needs.
The founder needs to be thinking about how to build a product and land customers not how to make rent and a car payment. There is no way a founder can be successful and have a second job.
What’s one traditional fundraising tactic founders should remove from their toolkit — something that no longer works but is still a common practice?
There were many tactics during the 2020 and 2021 bull market that aren’t appropriate for the current environment. These include setting arbitrary deadlines in an effort to create FOMO.
Another one is setting a specific raise amount and/or dilution targets without context for what investors are looking for. In today’s market that can show a lack of situational awareness, which could turn off a new investor.
Are pitch decks still necessary? Have you ever signed a term sheet without reviewing a deck first?
I have a strong preference for reviewing a pitch deck and have found it greatly increases the likelihood of a second meeting with a founder. Why? A pitch deck helps communicate complex concepts effectively, especially in areas where an investor might not be an expert.
In addition, seeing a founder present a pitch deck allows VCs to evaluate skills that enterprise software entrepreneurs will need for a long time: storytelling and selling.
Finally, a pitch deck serves as a useful leave-behind to reference, which increases the likelihood of a next step.
Please share one piece of advice that can help a first-time founder stand out from the rest.
Surround yourself with great advisers and early team members, especially those who are experts in areas where you might have less experience. First-time founders and CEOs are the only people in the company that can have no previous experience in their job (by definition).
Success, therefore, is going to be about the rate of growth of the founder, which will be highly correlated with being surrounded with great people. Recruit those people early and you will stand out.
What are you reading/watching/listening to right now?
I’m a huge “Ted Lasso” fan: I’m a massive believer in the power of great coaching in sports and startups.
Josh Constine, venture partner, SignalFire
What kind of opportunities are you looking for in April 2023?
I’m looking for consumer startups applying AI that can help us manage inbound message overload, bring video and community to historically text-dominated commerce verticals, destigmatize mental health treatment and help the next generation get jobs.
Some specific areas I’m looking at include a meme-sharing social network, an AI-powered replacement for WebMD, modern alternatives to 12-Step programs for alcohol and cannabis abuse, and more affordable approaches to childcare and homeschooling, since I’m a dad now.
Many workers who’ve been laid off recently are thinking about starting up their own companies. What’s one important thing they should know before pitching investors for the first time?
It helps to build a co-founding team with a balance of skills. Former employees from Big Tech companies should make sure at least one co-founder has early-stage startup experience without the giant research and talent budgets FAANG teams enjoy.
In the current macroeconomic climate, where it’s harder to get funding to acquire users with ads, you need someone with go-to-market experience who knows how to help great products grow themselves.
How do you prefer to be approached with an initial pitch: a cold email, a warm intro or another method?
A warm intro always helps, but just like when I was a reporter at TechCrunch, I love a cold but concise email. Funding shouldn’t be reserved for those with Silicon Valley connections. If you’re building something amazing, that should be enough.
We send lots of cold emails, too, when SignalFire’s Beacon AI flags great founders we should talk to. But this is also why becoming a great storyteller who can convey what’s special about a product is such an important skill for founders, and why I love teaching our storytelling advisory program to SignalFire’s portfolio.
TechCrunch readers can pitch me at josh+techcrunch@signalfire.com.
What’s one traditional fundraising tactic founders should remove from their toolkit — something that no longer works but is still a common practice?
Sticking “AI” in your deck doesn’t magically grant you a higher valuation. If you don’t have a sophisticated approach to building a proprietary data moat or tight feedback loop workflow so customers continually help refine your AI model so it diverges from the off-the-shelf LLMs, bolting on some naive AI strategy can actually hurt your prospects.
Also, stop putting your team slide first in your deck. Until I understand the problem you’re solving and how, I won’t know why your team’s experience is even relevant.
Are pitch decks still necessary? Have you ever signed a term sheet without reviewing a deck first?
We’re seeing a rise of pitch memos as an alternative or complement to pitch decks. Given your materials are shared with and between investors before a pitch meeting, a memo can let you go deeper into the nuances of your vision and strategy, whereas a deck can feel shallow without the accompanying live presentation.
A deck is still the quickest way to get your point across, but early-stage teams should focus more on having sharp insights than on sharp visuals. We appreciate the clarity of the memo, as there’s no way to hide messy thinking.
Please share one piece of advice that can help a first-time founder stand out from the rest.
Write great investor updates: They’re such an easy way to get your cap table to compete to add value and forward you on to new potential investors.
Beyond the essentials on product development and metrics, describe some new experiments you’re going to try, plus what you’ve learned from your last experiments and month of running the business. This demonstrates your growth mindset and refusal to get stuck in a local maxima.
Alongside some clear requests for help from your investors, emphatically thank investors who’ve helped recently. That will make your other investors envious and want to step up to prove their value.
We often request old investor updates during pitches so we can check progress to plan. Having an archive of smart and consistent updates makes you look transparent and reliable.
What are you reading/watching/listening to right now?
I try to read lots of science fiction to help me dream bigger. Right now, I’m enjoying the Hyperion series by Dan Simmons, which offers amazing insights on how AI will become a normalized force influencing politics and how we perceive our own purpose.
Are we still creators? Will we become solely curators of generative AI’s imagination? I’m excited to see us redefine what we consider “real” art and companionship.
Alexa von Tobel, founder and managing partner, Inspired Capital
What kind of opportunities are you looking for in April 2023?
Inspired Capital is an early-stage generalist firm, so we invest across all categories of innovation, from fintech to B2B SaaS to consumer and beyond. I always look for seed and Series A-stage founders who are building their life’s work and solving big, thorny problems.
The key questions I’m always asking are: Is this something with an extremely big vision? Does the founder have unfair advantages in their category? Does this business have many potential future chapters if successful?
Many workers who’ve been laid off recently are thinking about starting up their own companies. What’s one important thing they should know before pitching investors for the first time?
Make sure to do your homework before you meet an investor. Even if you’re meeting in a casual setting (like over a coffee) via a warm intro, this is an opportunity to make a great first impression that gets an investor excited about your next chapter.
How do you prefer to be approached with an initial pitch: a cold email, a warm intro or another method?
Warm intros are always helpful for filtering, but a thoughtfully worded cold email can always catch my eye.
How much salary should the CEO of a pre-revenue startup take? Would you back a founder who has a second job?
This really depends on the company, the founder and how much they’ve raised to date. We understand that founders are in different stages and have varying financial needs based on their family dynamics.
I look to back founders who are 100% in and wholly focused on their company every waking minute. As a founder myself, I know how all encompassing it is to be in build mode.
What’s one traditional fundraising tactic founders should remove from their toolkit — something that no longer works but is still a common practice?
I think traditionally, founders have been trained to go into pitches with a veneer. It’s time to get rid of that. If you’re not being your true self, you’re not going to attract the right people.
The founder-investor relationship is like a marriage; it’s incredibly long term. So don’t say what you think you want me to hear. Be honest and transparent throughout the process of getting to know each other.
Are pitch decks still necessary? Have you ever signed a term sheet without reviewing a deck first?
We have backed a super-select number of founders with back-of-the-napkin ideas, but typically by seed or Series A, we’re looking for a thoughtful pitch deck that paints a comprehensive vision of the company (today and in the future).
Tell us about the best pitch you’ve received recently: At what point did you realize you were going to invest?
Without giving away too many details, there’s a product that I’m an avid customer of that I knew instantly I wanted to back. It’s led by a founder who is clearly doing their life’s work and has poured blood, sweat and tears into the business.
Please share one piece of advice that can help a first-time founder stand out from the rest.
If there’s a company I’m excited about, it can be helpful when the founder proactively offers to make intros to customers. It shows that you’ve already fostered good relationships with your users and are thinking ahead about what diligence it will take to get to a term sheet.
Oren Yunger, partner, GGV Capital
What kinds of opportunities are you looking for in April 2023?
Still enthusiastic about innovations in enterprise infrastructure (data, dev tools and security), but it is clear that anything that doesn’t make it to the top three goals of a tech leader won’t get budgeted. That means that the bar for “new tech” is very high and that guides my decision making.
Many workers who’ve been laid off recently are thinking about starting up their own companies. What’s one important thing they should know before pitching investors for the first time?
Entrepreneurs should always think long and hard whether they want to devote 10+ years to this journey. However, in today’s volatile market, they must also evaluate if they have acquired enough relevant experience to overcome obstacles and uniquely position them to win in their market, and if they have the right co-founders. Being a founder can be amazing, but it is not for the faint of heart.
How do you prefer to be approached with an initial pitch: a cold email, a warm intro or another method?
Warm introductions from founders we know and respect are great conversation starters, but what really sets a startup apart is how well it solves painful, real problems in the market. And if enough operators recognize the same pain, then the founder is on to something.
I helped build unique angel syndicates composed of some of the most influential chief security officers (SVCI) and data leaders (InvestInData). These groups help shape my thinking, connect the dots and provide an opportunity to meet incredible founders in the areas I care deeply about.
How much salary should the CEO of a pre-revenue startup take? Would you back a founder who has a second job?
As little as they can afford to without significant challenges to their day-to-day and family. If a founder can prove they can build in a frugal way from the get-go, they have much better chances of success in the long term.
What’s one traditional fundraising tactic founders should remove from their toolkit — something that no longer works but is still a common practice?
FOMO has decreased quite dramatically. One should not be looking to “close the round within a few days.” That used to work, but now it pushes investors away, as they want to do their due diligence and get to know the founders.
Are pitch decks still necessary? Have you ever signed a term sheet without reviewing a deck first?
Slide decks are a great way to build structure into a story. They help show traction, use cases and other relevant proof points about the business. That said, I have decided to invest in several companies [in the past] without the founder presenting a formal pitch deck.
Tell us about the best pitch you’ve received recently: At what point did you realize you were going to invest?
During my last trip to Israel, my partners and I met a founder through an introduction from a great CEO in the GGV portfolio. The founder didn’t use a deck but told us his incredible life story and shared relevant experiences in the data domain that led him to become a RevOps savant. We felt tremendously inspired by the founding team.
While there is not an existing category for what the team is building, we connected the founders with more than 10 relevant tech leaders, 100% of whom actually converted to design partnership or commercial discussions. This gave us the validation we needed to partner with this great team on its seed financing.
Please share one piece of advice that can help a first-time founder stand out from the rest.
Hustle is a key trait that is often underestimated. If you can hustle, you can prove that you can get in front of customers, convince talented people to join your cause and finance the business in future rounds.
Know and articulate why you are the right and the best person in the world to solve a specific problem. Often, the “why” matters even more than the “what.” Think about how you will survive and thrive in this 10-plus-year journey.
What are you reading/watching/listening to right now?
“The Offer.” It’s a captivating series about the makings of “The Godfather” (thank you for the recommendation, Shlomi Ben Haim from JFrog).
And “Succession.” I am both so ready and not ready for this grand finale of a season.
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