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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Don’t Be Casual

Comments (13)

Coming out of the Venture Capital in the Rockies conference, I was pleasantly surprised with how solid most of the presentations were.  There was plenty of pre-conference preparation, practice, and iteration from the companies presenting – and it showed.

A few weeks ago, one of my portfolio companies met with a prospective investor.  The company isn’t raising money – they are doing very well – but will be in the market at some point.  The VC they met with has expressed interest in the company several times in the past, is a long time friend of mine, and is a smart, thoughtful guy.

I spent five minutes with the CEO of my portfolio company preparing him for the meeting.  Our time was spent entirely on the background of the prospective VC and some suggestions about how to approach the meeting.  I spent 0 minutes looking at the company “fundraising presentation” (since we weren’t fundraising – it didn’t really cross my mind) and I took the meeting casually assuming the VC would be also be viewing this as a casual meeting.

The meeting was a disaster.  I saw the presentation after the fact – it was a “C” – not horrible, but not very good, and certainly not “VC pitch friendly.”  The VC immediately formed a negative opinion based on being presented with data and a bottoms up corporate presentation (rather than a clear presentation that lead him through the business systematically.)  The result – no interest in having any further conversations.

My assessment of the problem was that we approached things casually.  Even thought this wasn’t a real “decision meeting”, we should have either declined taking it now since we aren’t fundraising (my normal approach), or should have prepared and not been casual.  I wasn’t paying attention because the prospective investor was a long time friend that has consistently expressed interest in the company.  The result – the door is shut for a real conversation in the future.

Simple message – in all fundraising situations – don’t be casual.  The first impression counts a huge amount and sets the tone.  This is obvious, but even after doing hundreds of financings, I blew it this time.

  • http://rfreeborn.blogspot.com/ rob

    We’ve gone through a similiar process in our sales organization where, instead of taking a “generic” .ppt along and assuming we are all ready for any question we have done better qualifying, tailored the preso’s and have had a strategy session before each pitch…the results have been awesome.

  • Dave O.

    Brad,
    I have a slightly different perspective. Couldn’t much of this pain been avoided by simply communicating with the VC about what his objectives were for the meeting. If you knew exactly what he was expecting then you would have crafted the appropriate presentation.

    For me the take away isn’t “don’t be casual”, rather it is communicate up-front,be clear of the agenda/objectives, and plan accordingly.
    best,
    Dave O.

  • http://www.feld.com Brad Feld

    Dave O – actually, we thought we knew the objectives based on the previous conversation I’d had with him. The goal was “a casual meeting” but the problem was that our definition of “casual” didn’t match his. Buried in my post is “… or should have prepared and not been casual” – since the format was “a presentation”, we should have put more effort upfront (same as what you are saying), vs. just “being casual about it.”

  • David

    Thanks for the post as sometimes I, and many others, forget what a cutthroat business it is. Even amongst fairly good friends.

  • james

    I’d really be interested in knowing what goes into the grading scale. What makes a presentation an A or B or C ? I know you said it was full of data and a “bottom up corporate presentation”, but I’m not sure I grasped what about it bombed. Could be a great post and lesson going forward. Maybe if we can raise the bar on presentations then preparedness might comes easier.

  • http://www.feld.com Brad Feld

    I’ve written in the past about good presentations to VCs. When I said “bottom up”, I meant that the presentation was way to product heavy and didn’t pain the big picture of why this company is going to be a large and important.

  • http://sabet.typepad.com bijan

    great post brad.

    i just sent the link to a few of our CEOs that are going to fund raise later this year. nice reminder.

  • http://www.feedburner.com Dick Costolo

    I’m putting words in brad’s mouth but by “bottom up” I think he also means that it didn’t tell a story. You can say the market is 11 billion in 2012, you have 99% market share, and your architecture goes faster than the speed of light, but you have to tell the story. Why does hypothesis A imply B and C from which you can logically conclude D, etc.

  • http://www.zaid360.com Zaid

    Brad,

    Have you considered putting the “Related Posts” plug-in for WP? Would really help readers looking to learn more about related stuff after a post such as this.

    -Zaid

  • http://www.feld.com Brad Feld

    If Movable Type had an equivalent plugin I’d try it. I don’t know of one – do you?

  • http://www.ctek.biz Jim Pollock

    Great point. I too have learned this lesson through my CTEK experience the painful way.

    Being the hopeful guy I am, my current mental model of VCs allows for “resilient VCs” and “brittle VCs”. With the brittle, you have one “first shot” and if you don’t impress, the fuse is blown. I’ve tried re-introducing a company or two that have since filled out their management team or changed their Go-to-market, and the response of the brittle is “we saw them last year and decided to pass.” End of discussion.

    I have also grown to know some resilient VCs that LIKE to see early stage, not-ready-for-prime-time companies. The resilient VC takes a look, offers advice, makes an introduction or two and then says “call me in 6 months and let’s see where this is at”. Put’s ‘em on the radar and starts the relationship clock ticking. I think the eco system would work a lot better if more VCs were like this.

    BUT… even resilients can have a brittle day.

    That being said, I don’t encourage resilient meetings without some coaching, preparation, pitch review, and talking to the VC ahead of time setting expectations. There may be holes in the plan, but they are clearly marked ;-)

    Which is a long winded way of still repeating Brad’s lesson:

    Don’t be casual. Two levels of receptivity. One level of preparedness.

    Jim

  • http://www.venturelaw.blogspot.com Suzie Dingwall Williams

    Your post completely, unreservedly resonates with me. Informational meetings are really hard to do well – you’ve got to show why you’re doing well as a company and why you’re excited about future without appearing arrogant. It’s not just about the slidedeck, it’s about the attitude you convey. A bad presentation gives the impression you don’t appreciate the VC’s time and you don’t care about his view. I cringe in solidarity with you. Lord knows, I’ve had to cringe in yoru seat before.

  • sigma

    Yes, Brad, you have described a common case of a much more common problem: An entrepreneur gives information to an investor, and the investor doesn’t get the kind, form, or type of information or the level of detail he believed was obviously appropriate, gets torqued, and cuts off communications with the entrepreneur.

    In a word, the problem is ‘communications’.

    Making the situation worse are some facts: (1) The investor gets a lot of really bad presentations; (2) the investor is very, very busy, has to sift through hundreds of presentations to get one worthy of much attention, and has little patience with another presentation that is not making good use of time; (3) parts of finance and investing, e.g., commercial banking and private equity, have some strong norms about what is appropriate in information from entrepreneurs; (4) some strong norms in venture capital hold that presentations from entrepreneurs should be very brief, e.g., as in the G. Kawasaki format of just 10 foils, with 30 point type, and with only about 10 lines of text per foil; (5) since money is the easiest thing to waste, investors have to be careful about being fooled and have to insist on a lot of quality, discipline, and effort from the entrepreneurs; (6) there can be some macho and ego issues about who is the more important or capable in business, etc., the investor or the entrepreneur.

    All of that said, there are some other issues: (1) The world is changing quickly; (2) ‘information technology’ is leading much of the fastest of the change and is the source of the lion’s share of good early stage investment opportunities; (3) part of entrepreneurship and ‘free enterprise’ is the ‘freedom’, and entrepreneurs are free to come up with wildly original ideas, techniques, algorithms, software, problems to solve, business models, etc., and recent history shows that early on many of the business plans, among both the best and the worst, were very challenging to evaluate accurately; (4) the technical world, especially in information technology, is close to the world of the leading US research universities where norms of communication are very well established and where students learn these norms thoroughly through years of both receiving and giving presentations, but these norms are radically different from what is expected in business; (5) fundamentally, a key to much of the value of technology is that there can be at its core some advanced, original ‘secret sauce’ that has the power to get especially valuable solutions to the problems; (6) in research universities, such ‘secret sauce’ is really the main concentration but in most of US business is just unheard of.

    So, a good salad needs both oil and vinegar, and high ROI just as much needs both investors and information technology entrepreneurs which, however, mix about as well as oil and vinegar — we could use a tablespoon of Brad Feld’s Dijon mustard emulsifier.

    So, considering facts 1-6 and issues 1-6, too easily an entrepreneur can take some ideas, wildly original or not, boil them down to something as brief as the Kawasaki format, present to an investor, and have the investor conclude that the wrong information was presented. So, with the brief presentation, the entrepreneur is able to shoot with only one small bullet and, thus, may well not hit the investor’s small target.

    It seems that keys to a solution include: (1) Try to get some good prior information about what information is desired; (2) arrive with a focused presentation of the information that was desired but also bring much more in case it is needed; (3) have both parties accept the fundamental difficulties of trying to hit a small target with one small bullet.

    With these keys, an investor who is not getting what they want should not feel offended or conclude that the entrepreneur has done something wrong and, thus, is incompetent and not a good candidate for an investment but should ask some questions to elicit the information that is desired. Typically a founding entrepreneur will have at their fingertips nearly anything anyone could want to know and be plenty eager to share it, especially just orally and in person. So, investors, once you are already in the room but not getting what you want, then slow down, relax, take a sip of ice water, ask, and you shall receive. Simple enough. Investors that do this stand to get significantly higher ROIs.

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