How to know an Investor or VC isn’t going to invest in your business
Fundraising can be a very tough activity with rounds spanning months or even years. One less thing to worry about is dealing with Venture Capitalists that aren’t actually interested in investing from the onset.
Here are a few signs to know them:
- If by the first meeting they don’t ask of how much money you are looking to raise; this is a no-brainer, they are just looking for ideas they are build on their own.
- If they don’t ask specifics on how you intend to spend the money you are about to raise; obviously!
- If they don’t ask questions relating to other participants who have invested or will invest in that round, just know they aren’t interested.
- If after commitment is made, the investor doesn’t keep to an agreed appointment on meeting you with term sheets — don’t bother trying to chase that particular investor anymore.
- If you get a call from a ‘VC analyst’, saying “we just learned about you through…and think you fit well with our firm…we would like to schedule an investor presentation…” just know it will will go nowhere. You’ve been setup for a fruitless Q&A session.
- If the first thing they say when you show up for the meeting is “I know we have an hour setup, but I have an urgent call in 30 minutes…” beware. This is a ploy. Their assistant will come in at the 20 or 30 minute mark and pass along a note to the partner. It looks like a message. The note says “do you want me to kick them out.”
- If they spend too much time speaking about themselves, their background, their portfolio, and not enough time getting to know you and your venture, beware.
- If you can’t get to a yes or no quickly, beware — you should typically get a definite answer within days of the final meeting.
- If they cancel your meeting a few hours or the night before you are to show up, stating that they will reschedule, beware (note: things come up, but their time is less valuable than yours.)
- If they ask no questions during the meeting, but then want more meetings, beware.
- If they criticise your PowerPoint slides, and offer suggestions on other details that might not be so important to the actual business,you should know the conversation isn’t leading anywhere.
- If they are quick in trying to introduce you to investors before they indicate their interest, please know there is a high probability they aren’t interested. Most VCs don’t want others to participate in a deal they can fully cover the round.
- If they drive the process, and make you do all the work without them investing any reciprocating time, beware (don’t go off doing a bunch of “research” or homework they ask for simply to email them your findings; ask them “what will this get me…how will you use this to determine if you will make an investment in us…I will walk you though the findings, in person!”)
- If they haven’t invested in close to 5 years, most likely yours won’t ‘re-awaken them.
- Beware the VC who leads with dogma, like “I never make investments in…” or “I only do….” I have found exceptions to these statements, brought it to their attention, only to hear “well…they made a pivot post funding”.
- Ask them this question: “why should I work with you?” and see how they respond. If they offer “strategy” “active board engagement” “operational expertise” “domain expertise”, follow up with “what advice would you offer me now…lets imagine you already invested” See where that conversation goes. If it doesn’t feel right, move on.
However, with quality research you can avoid meeting investors that will waste your time. You can ensure that your business is ‘investible’ and meets set criteria per industry.
Feel free to share other ways to know uninterested VCs