Once they’ve finished pitching investors, many founders leave the boardroom thinking things went well. The venture capitalists in the room nodded politely, said they’d “follow up,” and admitted the business model sounded “compelling.”
But after a seemingly good pitch, that promised follow-up doesn’t always happen. No second meeting gets booked, and no investment is made. What’s really being said behind closed doors after the pitch wraps up and the founder leaves the room? These five VCs share the inside scoop.
Whether To Pass Right Away
You might hope that VCs take a few days to weigh the merits of each pitch they hear, but that isn’t always the case. The sheer volume of startups they consider requires a process-of-elimination approach pretty much right off the bat. “At least 50% of the time, we’ll make a decision to pass within minutes of a meeting ending,” admits Amit Mukherjee, partner at NEA. This, he says, is actually “the biggest decision to make immediately after a meeting.” If the company isn’t an automatic “pass,” investors will agree to begin “investing time conducting diligence to learn more and test our theses.”
“If we’re digging in” during the pitch meeting itself, Mukherjee adds, “it’s a very good sign, and we’re serious about the opportunity.”
Their Top Concerns
Anarghya Vardhana, principal at Maveron, feels “proud that we are a no-bullshit team. What you see is what you get.” As a result, she says, “a founder will know where we are concerned or what red or yellow flags we are raising.” That candor sets the tone for the discussion that follows when an entrepreneur wrap ups their pitch. “Once the founder leaves the room,” Vardhana says, “it’s an opportunity for us to discuss what we love and what we are still unsure of . . . We can then prioritize the top concerns and bubble those back up to the founder for further clarity.”
The Founding Team’s Leadership Skills
Jacob Shea, partner at Structure Capital, also tends to zero in on the biggest potential issues before all else. “First, we cover all the negatives,” he says. “It’s easier to get the tough stuff all on the table and then compare it to the positives. After that, we take a look at the founders: Does this founder have the personality and attitude to motivate and inspire a team? Would and can great people work for this person?” According to Shea, these questions “are critical because no company is built by an individual.”
Is This Company A Game-Changer?
David Dubick, growth partner at DFJ, says his team is only seeking potentially world-changing companies, not merely profitable ones. “The first thing we think about after every meeting is: If this goes right, can this company truly change the world and have a real impact on society or the global economy?” he explains. “Can it define its industry or create a new one? Can it be an IPO-size company? If the answer is yes, then we dig in and do more work to evaluate the opportunity in depth.”
The Case In Favor
The conversations that ensue minutes after a pitch concludes isn’t entirely critical, says Magdalena Yesil, cofounder of Broadway Angels. “Usually, one of the VCs in the room brought the pitch to the rest of the partners. Once the founder leaves, this VC advocate steps up” to reinforce the stronger points of the pitch, she explains.
“Smart founders will have armed this advocate with a lot of details about the market size, competitive landscape, product details, and so on,” Yesil says. “In addition, this advocate is usually intimately familiar with the particular strengths of the founding team.” So even while VCs immediately start picking apart a startup’s potential flaws, founders should take heart that there’s likely at least one person in the room still going to bat for them after they vacate it.