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5 Ways Startups Can Ace a VC Investor Meeting

Mike Teng

You’ve started an education company and your clients are thrilled with your services, but in order to grow exponentially, you figure it’s time to go after venture capital money. I described in my last post how to create a money-winning deck. Here are some other things you can do leading up to and during the meeting that can help you be successful from the get-go.

Choose Your Top of Funnel Wisely

Just like when you’re choosing which schools and districts to go after as customers, figuring out who you want to be at the top of your VC funnel can ensure your pitch will not fall on deaf ears.

To find these top-of-funnel investors, start by doing a lot of reading. Read the trades that cover investments in your industry, read LinkedIn, and read the press releases investors put out.  

For our rounds of funding at Swing Education, we focused on education, marketplace, and staffing investors. We also talked to investors who were not interested in our space to get their perspective and advice. Also, being part of an accelerator like we were can help. The accelerator offers a demo day which will put you in front of several of the right potential investors.

Even with all of this preparation, be prepared for lots of rejection. It may have nothing to do with your business; it might just be a model they are not interested in at the time.

Prepare Your Deck and Be Prepared Not to Use It

VCs are good at trying to poke holes in things. So while everything in your deck is spun positively, and even though you spent the time to create an amazing deck that is sure to impress, you need to be prepared to get derailed – and that can be a good thing. If VCs are interested in your business, they will ask you about weaker areas of the business. Answer their questions then redirect the conversation back to your areas of strength.  

Match What You Want With What They Tend to Give

Before you decide what to ask for, you need to understand VC economics. VCs’ strategies are that for every investment opportunity that comes their way, they will meet with 1 percent of those companies. That 1 percent is what they choose from. In meetings, many founders will say, “This is a really solid business and we can grow 30 to 40 percent year after year,” but for an early-stage company, this isn’t exciting to VCs.

And, yes, that is true even for ones just focusing on education. If you’re under $1 million in revenue, you need to be north of tripling that number or more every year. The length of the sales cycle in education can make this really tough, however. If you are not showing amazing growth yet, you will need to have a good story about why it will change soon. But beware, this can be a trap. Your meeting may turn into “come back when it does change.”

Have a Spending Plan Ready

Planning ahead is something every business owner must do, and VCs are no different. It is perfectly logical for them to ask how you plan to spend the money you are asking for when you already have money in the bank. They may say, “How come you can’t do a small-scale thing today with the money you have, to prove that you will grow?”

You can’t be desperate and running out of money when you go after funding, so it is important for you to have a vision of what you want to do with their money in the next 2-3 years and the impact it will have on your growth. 

And, while it can be enticing, don’t take too much money. It can hurt your valuation. Instead raise the amount you need to grow to the next level and you will have a better valuation later.  

Share Successes With Potential Investors

The fundraising process can take three to four months, so when you have a positive business update, share it with your potential investors. If you are lucky enough to have successes weekly, go ahead and email them that often. You want to provide potential investors with the feeling that they need to get on the train now.

Keep in mind that the fundraising process is difficult for almost every company. Even when everything you might read about (or even hear directly from founders) sounds like roses and rainbows, it’s very rarely as it seems from the outside.

I am already working on my next blog which will focus on building relationships with your potential customers. Until then, please find me on Twitter @edumiketeng or mike@swingeducation.com.

Follow EdWeek Market Brief on Twitter @EdMarketBrief or connect with us on LinkedIn.

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