Last week, I had two very contrasting presentations from entrepreneurs.
I had an awesome young entrepreneur come in this week to talk about his seed-stage business. It was a one-on-one meeting between the two of us. He wasn't really ready to raise VC but wanted to meet me early in his process and wanted some help thinking through potential angel or seed stage investors. He was introduced by a senior technology executive that I really respect in the L.A. area, and a close friend of mine told me separately that he would like to invest if they did a friends-and-family round. Needless to say I was positively predisposed to this individual before the meeting started.
I highly recommend to all entrepreneurs to take the time to find the best sources of an introduction because it really does make a difference. It is worth any amount of extra effort if you are really interested in the VC you are approaching.
How you got to the VC is important, but once you're in the meeting, it's obviously up to you to make the most of it. We started by talking about this person's background. He had spent many years at Yahoo! during the better days and we had lots of discussions and debates about Yahoo!'s strategy and missteps. But we talked much more broadly about Google, Twitter, and Facebook. We talked about browsers, desktop widgets, and interactive television. We talked about measurable marketing. We talked about online video and the need to build and track audiences online.
I found myself so engaged in the discussion that after 90 minutes I realized we hadn't even broken out his PowerPoint presentation when I had to stop. So we scheduled our second meeting for next week when he could actually tell me more about his company. In the meantime, I signed up for his product and began playing around with it to get a sense myself for how it works before our next encounter.
Remember, he did have a presentation ready to go. On any given day, I could have been really pressed for time and asked to get straight to the presentation--you can never predict how the meeting will go, so you must be prepared to show a deck, do a demo, or just have a conversation.
This meeting was a 10 out of 10 for me. Who knows whether I will find his company interesting when I see the details at our next meeting? But so much of my decision on investing is based on the individual(s) that getting a chance for a true connection with somebody where you understand how they think about life, technology, management, etc. is important.
This entrepreneur had a full house. He was from out of town, so even though an individual partner hadn't properly vetted him before the meeting, we had all of our available investment staff sit in on the meeting. He was introduced to one of my partners by a very trusted source so we were ready for big things.
He started by showing a five-minute video describing why the market that he was in was such a great opportunity. It had the graphics of a highly produced Hollywood-like video with the voice-over of the cheesiest television commercial presenter you could imagine. Let me state my bias: There is never a scenario where you should lead with a five-minute video. It's even worse when it merely explains a high-level market concept.
I kept thinking two things during the video: 1) This is cheesy and painful; 2) Why is he giving up the opportunity to build rapport with us by telling us this stuff directly?
After two minutes of torture, I suggested that we stop the video. He seemed uncomfortable doing that so he let it keep running. After 4 minutes I instructed him to stop it. He reluctantly did. We asked the individual to tell us what he actually did. The video was so high-level and was explaining how advertising was all becoming measurable (duh), but we had no sense what his company's role in this process was. We all know that television broadcast commercials are not targeted. We all know that many companies have tried to deliver targeted advertising on the Web. Sir, what do you actually do?
What struck me is that he was never able to get into a discussion about the past of targeted advertising technologies--what had worked and what hadn't. We weren't able to have a discussion about who his target customer base was, why they would use his products, and why advertisers would pay for that. We didn't get a chance to adequately discuss the chicken-and-egg problem his company hinged on: getting users signed up and advertisers signed up simultaneously.
The fundamental problem that I saw with the whole painful hour was that he was in "sales mode" the entire time. He was so concerned with getting across his points that he failed to have a dialogue and engage us. A VC is never looking for you to have all of the right answers and the best VCs know that we don't either. We just want to hear how you think about your business, your industry, your competitors. We want to hear that you've thought about the risks. We want to hear your mental flexibility on issues and how you debate them.
I guess there are some similarities with the infamous "case" interviews that strategy consultancies give. It's not always the actual answer we're after but the quality of your thought process and how you arrived at the answer. Through this discussion you establish rapport and we build a relationship.
It wasn't going to happen with this individual. He ended the meeting by telling us that he wasn't really even raising money. If he had been raising money he would have been prepared to discuss all of these issues. He was defensive and seemed affronted that we wanted to discuss the complexities of building his business. I believe in seeing VCs before you're ready to fund raise, but if you're not prepared to have a discussion or debate about your company or industry then don't bother.
I am left wondering if he really had no interest in ever raising money from us--why was he there? Why would he waste his time and ours? Sheesh.
Mark Suster joined GRP Partners in 2007 after having worked with GRP for nearly 8 years as a two-time entrepreneur. Most recently Mark was Vice President, Product Management at Salesforce.com following its acquisition of Koral, where Mark was Founder and CEO. Prior to Koral, Mark was Founder and CEO of BuildOnline, which was acquired by SWORD Group. Earlier in his career, Mark spent nearly ten years working for Accenture in Europe, Japan, and the U.S.