Raising A Seed Round Part 7: Navigating Each Firm's Investment Process

March 26, 2021

Persuading a firm to offer a term sheet is basically an enterprise sales process. You need to find and persuade a champion, then help them build consensus to get the necessary approval from the organization as a whole.

The Idealized Process Is Four Meetings

For most VC firms, an idealized process, assuming you have no relationship with the firm prior to raising, has four meetings from the first time you sit down with a decision-maker to getting a term sheet.

The first meeting is with a partner, generally you and them, sometimes with an associate or two on their end, sometimes with a cofounder on yours.

If that goes well, you will likely have a second meeting with the same partner.

After that, your third meeting is generally with both the original partner and another partner, probably the person they work with the most closely in the firm (because they look at similar kinds of deals).

After that, you’ll present to the full partnership.

What Success Looks Like At Each Meeting

Obviously every interaction is different — depending a lot on firm structure and ow much you’re pitching them vs how much they’re pitching you, but a typical interaction goes something like this:

  • In the first meeting, you’re trying to show you’re interesting. The goal is to feel like you have a plausible path to becoming a huge company with only a normal level of risk. They’ll ask you a number of questions in a “breadth-first” search — if you get more than one follow-up question on a particular topic, it generally means the investor didn’t like your answer.
  • In the second, you’re trying to address concerns, and really flesh out the path to be huge. The partner may dive deeper and probe topics from the first meeting. Deep dives here are generally good and a sign of interest.
  • The third meeting is mostly a re-run of the first meeting, but with a new character asking questions. At this point, your primary contact has some amount of conviction, but is trying to build consensus in the firm.
  • The full partnership pitch is a different beast altogether. The time for being asked new, incisive questions is likely past now. You’ll be asked a lot of questions by smart people with little context with a dozen people carefully scrutinizing your responses. The best “full partnership” presos tend to answer questions with customer stories rather than logical arguments or facts and figures, since stories play best in this situation

Additional Notes

After meeting 2, you’ll know if a VC is interested. VCs are busy folks, so sometimes they’ll drop the ball around getting meeting 1 on the calendar, or between meeting 1 and meeting 2.

But if they drop the ball after meeting 2, it generally means they just aren’t interested. Remember, VCs are professional salesmen, selling money for equity. If they’re interested, you’ll know.

Fewer partners, fewer steps. This process works much faster the fewer partners the firm has. A two-person seed fund may take less than four meetings. Five meetings with another deep dive is fairly reasonable.

Once you start getting into six- or (worse) seven-meeting territory, you have to wonder if the firm is actually interested, just mining you for information, or if there are some weird partner dynamics going on behind the scenes.


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Written by Sam Bhagwat, cofounder & chief strategy officer at Gatsby; programmer, analyst, writer; follow me on Twitter!