It’s too soon to determine if the fall of SVB heralds a new era for venture capital, but based on anecdotal evidence, off the record discussions, and chats with co-workers, it appears that we are back to normal where fundraising kicked off before the income is concerned.
It’s not a scientific sample, but several investors signaled this week on Twitter that they remain interested in talking to founders who are still in the idea stage. My take: With the contagion contained, the VC community feels fine writing small checks for startups with no revenue, but Series A and above? More or less.
As long as this recession persists, this investor Q&A will be a monthly column on TC+. Whether you’re a recently laid off worker considering striking out on your own, an H-1B employee who’s made it this far, or just looking for tips and advice that can help you connect with early-stage investors, please read and share.
Many thanks to all the investors who took the time to answer these questions in such detail! If you’re an early-stage investor wanting to be included in future columns, please email [email protected] with “How to Introduce Myself” in the subject line.
These are the ones who participated:
- brian backeengeneral partner, Lightship Capital
- masha bucher, founder and general partner, Day One Ventures
- Rebecca Liu DoyleCEO, Insight
- Clelia Warburg-PetersManaging Partner, Era Ventures
- nick adamsManaging Partner and Co-Founder of Differential Ventures
- Lisa Lambertfounder and president of National Grid Partners
- elizabeth yinco-founder and general partner, Hustle Fund
Brian Backeen, General Partner, Lightship Capital
What kind of investment opportunities are you looking for in March 2023?
Like many investors, we are bullish on AI. We made two AI-related investments in April and continue to look for opportunities in that space.
How would you prefer to be approached by a founder with their opening pitch: a cold email, a warm introduction, or another method?
We have an online portal at lighthouse.capital that founders can use to solicit investments. We do this to avoid a problem with VC investors called “network bias.” Founders must apply on our portal and follow Twitter.
What is a traditional fundraising tactic that founders should remove from their toolkit, something that no longer works but is still common practice?
Solicit warm introductions and try to “build rapport” with investors. Spend your time building a great business and you will earn investment. I don’t need new friends.
Tell us about the best pitch you’ve received recently. At what point in your presentation did you realize you were going to invest?
I was introduced by a firm called MuseTax recently. Great founders, subject matter experts, the real deal. It made me want to invest in the first 10 minutes. They are on stage now.
Can you share a tip that can help a first-time founder stand out?
Don’t focus on the investment; focus on design. Don’t let your engineers build an ugly product with great password reset functionality but limited user value.
Don’t let the engineers tell you you’re not ready; is. Push it and learn.
Design it well and users or investors will follow. Design the first version well and you’ll end up with lots of engineering bills and no progress.
What are you reading/watching/listening to right now?
I keep watching season 1 of “Billions”. You know, before it got weird 🙂. Big show.
Masha Bucher, Founder and General Partner, Day One Ventures
What kind of investment opportunities are you looking for in March 2023?
During a healthy fundraising environment, the founders who do best often rely on their storytelling prowess and can win over investors with their charisma. They are the ones who are naturally good speakers and articulate with their vision.
There is a second type of founder with a different background. They are often upside down, rudimentary, and resource oriented. I call them “survivors”. Survivors are often immigrant founders, people of color, women, or others from underrepresented backgrounds.
I think survivors are the type of founders to back up during a downturn. They have been pushed to be rudimentary and survive all their lives; they are specially equipped to handle what the current times demand of them. They are good at making something out of nothing and are extremely profitable.
I’m looking at paths to monetization, business models, and paths to profitability. Investors are paying much more attention to numbers, business models, and the way founders manage finances. Expect many more questions challenging the business model.
I’m looking at how much revenue is coming from product quality vs. marketing. Founders who generate virality based on product quality show that they can make money with little marketing investment.
We love companies with high EBITDA. We love companies like Quinn, which has grown millions in revenue in just one year since launching with zero-cost viral marketing on TikTok.
How would you prefer to be approached by a founder with their opening pitch: a cold email, a warm introduction, or another method?
Cold email works very well, but it’s surprising how few people can do it well. In a cold email, every sentence should convince me to attend a meeting. With every word and every sentence, you must create the desire for an investor to meet you in person. You have to show a clear reason why they need to meet with you now, not next month.
