Season 1 | Part 2 | Episodes 26-50

VC Minute is quick advice to help startup founders fundraise better.

This is Part 2 of the Season 1 complication, covering Episodes 26-50.
 
With short episodes—1-2 minutes—released every workday, founders get guidance into the dynamics of seed stage financing. Every episode is packed with insights and actionable advice.  Learn more here: https://springtimeventures.com/vc-minute

This compilation contains the following episodes in order:
26-The Deck Gets The Meeting
27-Don't Make Me Think, Don't Make Me Work
28-Two Decks
29-Break the Frame of Reference
30-Just Send the Deck
31-Your Fundraising Competition
32-Too Early
33-Venture Scale Returns
34-The Hard Truth
35-Back to the Pool Party
36-Talking About Exits
37-Bridge Round
38-Conservative
39-FOMO - The Subtle Knife
40-Series A in 6 Months
41-Too Risky
42-Questions for Investors About Risk
43-That Aspen Money
44-Dribs & Drabs
45-No Is the Second Best Answer
46-You Have One Job
47-Pausing the Treadmill
48-Building Investors' Confidence In You
49-Learn From Every Pitch
50-VC Validation

Links mentioned in episodes:

• Slide from Allhers: https://springtimeventures.com/vc-minute/029-break-the-frame-of-reference/
• Saba Karim: https://www.sabakarim.com/
• Riderflex podcast: https://springtimeventures.com/partner-news/riderflex-podcast-interview/
• Hate Your Deck podcast: 
  • https://open.spotify.com/episode/3HEoZO4vlRMymWhTGNPjp1
  • https://podcasts.apple.com/us/podcast/4-mastering-the-fundraising-mindset-with-rich/id1625984941?i=1000571353280

About SpringTime Ventures

SpringTime Ventures seeds high-growth startups in healthcare, fintech, logistics, and marketplace businesses. We look for founders with domain expertise, forging a path with a truly transformative technology. We only invest in software-based businesses in the USA. We bring a people-focused approach, work quickly, and reach conviction independently. Our initial check size is $400k to $600k. You can learn more about us and our approach.   

About Rich Maloy

Rich's mission is to rebuild the American dream through entrepreneurship. He works with early stage startups transforming the world, giving all people the opportunity to grow, learn and earn. With prior careers in finance and sales, he's now focused on startups investing through SpringTime Ventures where he is a Managing Partner. He's a father of two young children and loves sci-fi, skiing, and video games.

Transcript

Rich: 0:01

This is Rich Maloy with SpringTime Ventures, bringing you the VC Minute, quick advice to help startup founders fundraise better. This week, we're talking about pitch decks. The point of your pitch deck isn't to get an investment. The point is to get a meeting. It's just like when you're job hunting. The point of a resume isn't to get the job. The point of the resume is to get the interview. The pitch deck is serving the same purpose. Build your deck in a way that is compelling. That is clear and concise. That tells a great story. And that investors can't help but ask for more information. Should it have 40 slides? Hell no. Should it have a dozen slides that build and build and build your story until you reach the final point where somebody just can't help but reach out to you? Yes. Build your email deck with this in mind. What you're trying to do is get the meeting. You're not trying to close an investment with this deck. You actually should have a separate deck for that. I'm going to be giving some pitch deck advice throughout this week. I have very strong feelings about pitch decks and everybody does. I want you to know that this is all coming from a place of love. When I do pitch deck reviews, it is with the most critical eye that I can muster because I really deeply care about the founders that I do reviews for. If, what you hear from me this week sounds critical, know that it is. And that it's coming from a place of love, because I want to see you get the meeting and then close the investment. My number one rule for pitching and pitch decks is: Don't make me think. Don't make me work. The pitch deck that you email ahead should be fully self-contained. It should tell a compelling story that even the broiest of bros can follow. Founders, you're so deep in your business that it's easy to simultaneously omit details that would be important to someone coming in cold, and go too deep on other aspects of your startup. So now you've got an investor who doesn't even understand the fundamentals of your business trying to decipher your dissertation. Besides. The first time an investor opens your deck they're probably skimming it, probably on their phone, maybe during a meeting. Expect that your pitch deck doesn't have their full attention the first time through. But even on an investor second or third read through, they need to make a business decision. Should I spend more time on this pitch deck? Should I spend more time on this founder? Should I spend more time on this business? If they're lost in your pitch deck, if they're not understanding it, if they're not following it, if they're annoyed because they can't figure it out, you are not going to get an email back from that investor. This is why I say,"don't make me think, don't make me work." Here's six things in my"don't make me think don't make me work" list. One using acronyms, only someone from your industry would know. 2. Discussing multiple concepts per slide, revenue model, market opportunity, customer quotes. All of those go on separate slides. 3. Charts with missing labels. Don't even get me started. 4. Not succinctly explaining what the hell your business does. 5. Not showing how you make money or plan to. 6. Making bold statements unsupported by the rest of the deck. Building a deck is an iterative process. It's a storytelling process. Send it out to startup friends, send it to current investors, trusted service providers, or any folks in the startup community that will take a look at it and give you some feedback. Get critical feedback. Push for more than just,"yeah, it looks great." No. If it's the first time you sent it out, it doesn't look great. You need to get feedback on it. And for the love of IPO, put your email in the deck. I mentioned before about having two different decks, your email deck and your pitch deck. Here's what I meant by that. The email deck, the one that you send ahead, this is meant to grab people's attention. It's short, it's concise. It's powerful. It gets you the meeting. And when you get the meeting, you pull out the pitch deck. This one has more detail and lets you tell a fuller, more complete story. You can really dig in using this deck. If the whole purpose of the email deck is to get the meeting, the purpose of the pitch deck is to get the investment. Maybe in that meeting, maybe not. But here's where you show the depth of your expertise and your obsession with building this business. At SpringTime, there've been a few founders that have absolutely blown us away and a lot had to do with how they pitched. I'll never forget this one. Founder that had a slide for every question we asked. I mean, Hey, VCs are all asking you the same questions anyway, right? He walked us through the initial deck, and then we started asking questions. For every question we asked, he pulled up a slide from the Appendix and answered us. I swear he had 60 slides in there and an answer for everything. Another time this came up, we asked a founder about his growth plan, and he pulled up a separate deck that was his growth strategy deck. He had multiple decks to discuss different aspects of his business. These are founders that have thought through their business so deeply and so completely that they've committed their thoughts to slides, and they're just ready to talk to them. What it comes down to is that pitching is storytelling, and decks are a tool to tell the story. The email deck gets to meeting, the pitch deck gets the investment. And even makes a good followup that you can send after the meeting. One of the most powerful things that you can do in your email deck is to break the reader's frame of reference. This is where the idle skimmer flipping through decks,"Pass. Gonna pass, gonna pass, gonna pass..." and BAM! You hit'em over the head with something that they can't ignore. You break them out of the monotony of skimming 62 pitch decks a day. The easiest way to do this is if you have incredible revenue, drop your revenue chart in there. In fact, put it right at the front. One of our portfolio companies from Fund I, the very first slide after the title slide was their revenue and it was amazing. Hands down, my favorite example of breaking the reader's frame of reference was the pitch deck from Allhers. Allhers is a private community for local women with style. And I'll link to the site and the show notes, I'll link to it in social. In fact, on my social, I'll include an image of this slide. I'll do my best to describe this, but it really is something that you need to see. So make sure that you go and check it out. At the beginning of the deck, they're building up to all of the problems that women have to deal with when making purchases off of Craigslist or Facebook Marketplace or anything along those lines, it's just a shit women have to deal with. And the next slide says, Question: what's the solution? Answer, not men." Except it doesn't actually say"not men." It's Men, with strike-through, and it's brilliantly done. It is such a powerful slide. That's all, that's on the slide. Immediately, it broke my frame of reference that,"oh, I'm a man reviewing a business, being built for women." And I literally laughed out loud when I saw it because it was so good. Not every business has this and that's sort of a slide from Allhers can go wrong if it's done poorly. They just happened to really nail that one. You have to think,"what is the way that I can break the reader's frame of reference?" How can I get the idle skimmer to stop, and look at what I'm doing and pay attention. It could be a big stat that blows their mind, an amazing revenue chart, or it could be something to make you stand out. Because again, the purpose of the email deck is to get the meeting. What's it going to take to get the meeting? You have to stand out. How do you stand out? Break the frame of reference Hey, happy Friday, everybody. Another week of VC Minute. I have so much more to say about pitch decks, but I think we'll cap it for there for now. Last thing I'm going to add, and this is advice from my buddy Saba Karim, who is the Fund Manager for Techstars Rising Stars Fund, as well as the Director of Global Startup Pipeline for Techstars. He's been with the Techstars organization for a long time. Everybody should be following him on Twitter and on LinkedIn, he puts out a ton of great content. One of the things that he says is just ask the ask. He says things to avoid when reaching out for help asking if you can ask a question, asking if you can send a deck, and asking if somebody can do you a favor. Just ask the question, send the deck and ask the favor. I love this advice from Saba. So, don't email people asking if you can send them the deck, just send them the deck. That's the purpose of it. Send it! And one more shout out this week to Steve Urban and the RiderFlex podcast. I was interviewed by them and the podcast just came out and this was a very personal interview. Thanks to Steve for his great questions and really digging in on more of who Rich Maloy is and my background and some of my family and backstory. And so if that's something that you're interested in hearing about, check it out we'll put a link on the website and the link in the show notes of this episode. So with that, thanks again for listening this week, time is our most precious asset and I appreciate that you'd spend more of it with me. Welcome back to another week of the VC minute. This week we're covering reasons funds say no. Let's start by talking about your fundraising competition. I'm not talking about the competitors in your industry. Instead there are two dynamics working against you at every venture fund. First is that a VC is going to make a limited number of investments from each fund. If I'm going to make 30 investments and I see 6,000 startups over the life of that fund. I'm saying no to 99.5% of all startups. And this is not really insightful; you get this. But each fund does this differently. So ask, how many investments do you plan to make from this fund? How many do you have left? The second dynamic is less obvious. Your competition in that moment are the half a dozen other startups that I have in my diligence process at the same time as you. You're not necessarily going to lose out on an investment just because a VC has a lot in their pipeline. But like you, we only have so many hours that we can spend working. So we always want to be sure that we are super focused on the funding rounds that are the highest priority. We're constantly reprioritizing and refocusing our efforts. If you're getting the SHITS from an investor, it may be that they have a backlog of diligence and you're somewhere in the middle of the stack. The danger is that the longer you stay in the middle of the pack, the more likely you are to move down, or possibly never hear back. This is where the pool party can help you or hurt you. Your fundraising process cannot be haphazard. Pack your schedule with meetings. And I'm going to talk about this in a future episode. But get in front of investors and keep the round moving forward. Stay top of mind with the investors that you've already met with by sharing updates about your round and recent wins. Keep the communication flowing. And if enough has changed since you last spoke, suggest a 15 or 30 minute update call. Keep scooting those investors closer and closer to the edge of the pool. Keep your investor process moving forward, because when your process stalls, your round dies. I talked to a founder the other day, who was frustrated by being continually told he was too early. It's especially frustrating when you know the people you're hearing this from actively invest in companies at your stage. But an investor saying"you're too early" is not the whole story. There are of course cases where you are actually too early. And you can vet this pretty quickly with an investor by asking direct questions such as, do you invest pre-revenue? Do you invest at my stage? What do you typically look for for companies at my level?" With those questions you'll know if you are actually too early, and even better you'll know what you need to talk to in your presentation. When you're talking to an investor that writes checks at your level, and they're telling you that you're too early, here's the real problem, your vision. You haven't sold them your vision. Mike Maples from Floodgate says that great founders are like time travelers. I love this. I'm going to paraphrase his explanation and riff on it a bit. You need to come from the future and tell the present day investor what the world is like with your product at full-scale. How have you changed people's lives? And, as important, what are the inflection points, that bring your future into existence? When you sell the vision, you'll have an investor who wants to bring that world into existence with you. And even if you are, in fact, too early for that fund, you may have a strong lead for your next round. The earlier you are the stronger you need to sell the vision. Even with traction, you still need to sell the vision. So take a minute, time travel to the future, look at the world, and tell me what it's like. Another reason that funds might be saying no to investing in you, but also not sharing this feedback with you, is the thinking of,"can I return the fund with this investment?" What we're looking for with a venture investment are venture-scale returns. What does that mean? I'm going to give you the high level, gloss over a lot of things, but let's just say I've got a$25 million fund, and my initial investment gets me 4% ownership in your company at the seed stage. If your company goes really big I expect that I'm going to get diluted by half. So now I've got 2% ownership at exit. I need that exit to be$1.25 billion to return my entire fund. This is the type of investment that most VCs are looking for in every single investment. How do I return the fund, with this one check? Because here's the thing, out of that$1.25 billion exit,--by the way, you did great in that so congratulations! How much do you think that I paid myself as a general partner from my fund out of that investment? Zero. The only thing that that huge exit does for me is I pay back all of my capital to my investors. And then everything after I pay back my investors is when I start to make money on my carry. Even with a unicorn scale exit paying back my investors entirely, I have not even paid myself anything other than salary. And I know what you're thinking here,"oh, boo hoo. Poor VC only paid himself as salary. Didn't make his bonus." But if I want to stay in business, I need to return multiples of capital to my investors. To stay competitive as a venture capitalist, you need to at least triple the money that the investors put in. It keeps coming back to, how do I return the entire fund from this one investment? And if a venture fund doesn't see the path for them to return the fund from that investment, then they're out. And they may not share that with you. But here's the irony. I also don't think that you should be talking about an exit. Especially, not at the seed stage. But we'll cover that next week. I was going to save this episode for Friday, but I thought I'd end Friday on a happier note. In fact, I even debated if I should record this episode at all. But I felt that I really owed it to you, the listeners. The folks that have reached out to me and said that the VC minute has been great and that they appreciate it so much. All of that means so much to me and I feel that I owe it to you, the listener, to dig deeper, to share this one really gritty truth with you. The reason that many investors may be passing or ghosting you, is because they don't have faith in you to build the business. And that is based completely on subjective experience. In most cases, they've spent what, 30 minutes with you? You even hear some investors talk about how they know within 60 seconds, if they're going to invest in a person or not. Whether an investor has spent five hours with you or 60 seconds, they're making a judgment call on your ability as a leader. Here's the thing, we're wrong about this all the time. And I would say that in many cases, we don't even feel like this is appropriate feedback to give. And of course, nobody's going to tell you this directly because it's... shitty. And it's unfair. And it's based off of just maybe a gut instinct. But friends, the flip side of this coin is that that investor is not the right investor for you. If they don't believe in you, and you can't convince them that you're the leader to take this all the way, then they shouldn't be on your cap table. My friend Josh always says, we are all beautiful, flawed human beings. And I love this. So go find those beautiful, flawed human beings that believe in you in your beauty and your flaws. That want to back you to build and grow your business. Happy Friday, everybody. It's a Friday in July, and do you know, what's the perfect thing for a hot summer day? A pool party. Oh yeah. It's back to the pool party because an investor that lacks conviction or has concerns, that they're probably not sharing with you, feels validated when the pool party is empty. This is why throwing a hot pool party is essential to a successful seed round. All those concerns wash away when the pool party is packed. There are three psychological factors at play here. First, social validation. Someone else must have done the work. Second, confirmation bias. I can have my fears assuaged by hearing what I want to hear from the folks that are in the pool. And third, FOMO. Oh, FOMO. Try, as we might aware all subject to its dark powers. Do I have a lot in my pipeline, got to reprioritize it to make it to the pool party. Too early, maybe I'm wrong. There's a lot of people in that pool; they don't think it's too early. Unsure about venture scale returns? Someone in that pool must have figured it out. Let me ask around. Founder concerns? It can't be that bad; look at all those people in the pool! A hot pool party makes everyone feel like someone else has done the work. And if you have a strong lead, they actually did the work. And they should be the ones pulling folks into the pool. Work your system to get through investor systems, build momentum, and fill the pool. Easier said than done. I know. But for now happy Friday. I hope you have a fun and restful weekend. And go jump in a real pool and cool off, splash around for real. Thank you for spending some more of your time with me. We'll be back next week with things not to say during your pitch. If you've been enjoying the VC minute, do me a favor pop into your favorite podcasting app, give it a thumbs up, give it five stars, give a quick rating. I'd be so grateful. Thank you so much. This week on the VC minute, we're going to talk about things you shouldn't say to investors. I've been asking founders for a while now,"where do you see your company in five years?" The answer I hate to hear is,"we'll have an exit by then." Okay, hold on. You. And I both know that I have a fiscal responsibility to my investors to return multiples of their capital. And I do that by having liquidity events from my investments. But if you think that telling me that you're going to sell your business in five years is what I want to hear, you've got it wrong. Angels want to hear about this, but not VCs. And for me, it actually throws up two major red flags. First startups are hard. Really really hard. If you're in this only for the money, then I question, if you're going to have the grit to push through all the unforeseen, gut-wrenching keep-you-up-at-night problems that will come your way. There are dozens of studies that show that money is not a prime motivator. And if you're in this only for the money then I'm wondering,"do you really have enough motivation to get through the hardships?" Second, while it's true that I am looking for exits, what I'm actually looking for our return-the-fund exits. I talked about this last week in episode 33, so go back and give that a listen to hear me talk through venture math at a very high level. I'm not looking for a dozen companies to return two to three times the investment. I'm looking for your company to return the whole fund, and then some. That's how venture capital works. I'm also of the firm belief that your pitch deck should not have an exit slide. I think that talking about an exit strategy at the seed stage is ridiculous. Sometimes you don't even know what your customers want to pay for, and you want to talk about who's going to buy you? That's silly. I want to back founders that want to change the world. Not cash their chips in. I strongly recommend that you don't talk about, exits, that you talk about the future that you want to build with your business. Go back to that Mike Maples quote from Floodgate, great founders are like time travelers. Go to the future and tell me what the world is like. Just don't tell me that it involves an exit in five years. One word you should never say while fundraising is bridge. Saying you're raising a bridge round immediately conjures this question in investor's minds,"is it a bridge to nowhere?" Investors will ask this of themselves or their colleagues, and it's gone from being a joke, to an old joke, to simply the next expected question. If you say this while fundraising, it puts you in a defensive position having to explain why this is not a bridge to nowhere. If you never want to call your funding round a Bridge Round, what do you call it? The beauty of the current seed fundraising environment is that it's a phase. You may raise a Pre-Seed, a Seed, Seed 2, a Seed Extension, all before you raise a Series A. I even saw a funding round recently come through announced as a Series A-2. Even better, if you have most of your current investors committed to a re-invest in this round, then it's an insider round. That carries even more weight. None of these is a Bridge Round and no one should ever label it as such. It may seem minor, but investors can no more stop themselves from picturing a bridge to nowhere, than you can prevent yourself from thinking about a pink elephant, no matter how emphatically I tell you not to think about a pink elephant. So good luck raising your seed to round! Today you on things you should never say while fundraising is the word... conservative. Your pro forma financial statements are not conservative. Your revenue projections are not conservative. They are complete fabrications! And that's okay. The point of your pro forma financials is not to accurately forecast how you're going to get to$10 million MRR by year three. The purpose is in the name. Pro forma is Latin for"for form". As in, something done for the sake of doing it. Whether or not I believe you are going to get to$10 million MRR by year three is kind of beside the point. The point is in the exercise of doing it. I want to see where you think that revenue is coming from, if your cost of sales is realistic, what's your staffing plan is, and more. Show how you get from Here to There, and let me better understand the drivers of growth. When you say your projections are conservative, it says two things to me. First, it reinforces the fact that you haven't been through this process before, because every first time founder says,"these are our conservative projections." Second, if they're your conservative projections, then why are you showing them to a growth investor? The lesson here is that you don't need to label them at all because you have already done so: they are pro forma. And they should reflect the growth that you can reasonably expect to achieve with this round of financing and how that gets you from Here to There, so you can level up on the treadmill. I want to dig in on FOMO a bit more so that you're not overplaying your hand here. I was on the Hate Your Deck podcast recently, link in the show notes, and the host, Mike Lightman, was a VC in the past and he said he was not a FOMO investor. But he did say that if a round was moving and there was a tight timeframe, he'd move that one up in his process. And that's exactly what I'm talking about. Founders, this is the only bit of FOMO that you need. When I talk about FOMO, I'm not talking about artificially creating it, like this is some kind of YC demo day from back in the day. I'm not talking about heavy handed,"better get in now before I give away your allocation." If you use FOMO as a bludgeon, it'll backfire. FOMO, in the VC Minute playbook, is a subtle knife that cuts through silence to elevate you in a fund's process. It's as simple as this: You asked me to circle back as the round was coming together. I'm pleased to say that we have 1.3 million committed on a 2 million raise, with enough interest to fill out the round. We're lining up commitments for the remaining amount, and we'd like to give you an update. Here's my schedule. I didn't make an ultimatum. I didn't beat them over the head with a sense of urgency. I didn't try to play some funny games. I just plainly stated the facts. Mike from Hate Your Deck and yes, his company builds start-up decks and yes, I love his company name. He was not a FOMO investor. I'm not a FOMO investor. But we are all subject to its dark powers. Just ask me some time about getting sucked into a FOMO vortex at the airport, on my way to vacation. Just last month. When you show investors that other people are in the pool, that will create just enough to get you moving through their process again. And if you have a wide enough net, then real FOMO kicks in at the end, and you can oversubscribe it. Thank you, Mike, for the good conversation. And I really look forward to round two. Everyone go check out the Hate Your Deck podcast, and listen to the spirited debate we had on decks and fundraising. Wrapping up the week of Things You Should Not Say to Investors is SpringTime's favorite, or rather least favorite thing to hear: six months after this seed round, we're going to raise a Series A." There is so much wrong with that. We're going to put aside web3 right now, because things in that world are moving... differently. I digress. First. It can take up to six months to run a Series A process. Typically it takes two to three months. That means if you want to raise a Series A, you need to be at Series A metrics somewhere between now and the next three months. Let's go back to the VC treadmill analogy, and go back and listen to episode 16, 17, and 18 for more on this; those are some of my favorite episodes. High level, VC Treadmill is the process of raise, spend, grow, repeat. Only the absolute best of the best startups in the hottest industry with the highest velocity can skip the"grow" part of that. And even then only once. And usually not from Seed to A. Let's put this mythical six months on a timeline. You need to close the round, that takes one month. Hire great people, at least one month. Get those people up to speed, whether it's sales, product or engineering, at least one month on that. Now you're three months into your six month window and you're just now shipping product, ramping up sales, ramping up marketing. Now you need to start your A round and all you have to show for it is higher burn. It just doesn't work. Fundraising takes the CEO out of the business for the duration of the raise. Runway is important because it means the CEO has time to get back into the business to focus on the growth. Don't tell investors, you're raising a series a in six months. It doesn't show that you have aggressive growth expectations. It shows that you have unrealistic expectations and the business is going to suffer. That's a wrap for this week. Hit me up on LinkedIn or Twitter, let me know what sort of content you'd like to hear. Thanks for listening again. Time is our most precious asset and I'm grateful you'd spend more of yours with me. A startup told me the other day that an investor passed saying the business was too risky for them. And the founder was frustrated because isn't risk taking the very nature of venture capital? To me, this is the difference between risk and uncertainty. Risk is making a decision where the potential outcomes can be reasonably estimated. Uncertainty is where the risks are unknown. We invest in risky businesses, which means that we feel we've got a good grasp on the odds of different types of outcomes, including a zero return outcome. When we hit on uncertainty, that's when it becomes hard to get to a yes, because uncertainty is where we're unable to assess the risk. This is why investors have industry or market specializations. They've developed a better understanding of the risks involved, so there's less uncertainty for them. For example, we're not well versed on B2C business models and definitely not on selling physical products direct to consumer. When I look at these businesses, I see a lot of uncertainty; I don't even know where to begin. Whereas a Lightspeed or Lerer Hippeau have far less uncertainty because they have extensive DTC experience. They can better assess these businesses based on known risks. This is all the more reason to do your homework on investors before reaching out to them. Once you're on a call with investors, dig in on areas of uncertainty that they may have around your business. This risk versus uncertainty is my mental model, and other investors probably don't think about it like this. But you can ask investors what they think is the riskiest part of your business. Investors are comfortable taking risks, but if they can't assess it, then they're in the realm of uncertain and they're going to pass. Just because I know the risks, doesn't mean I'm going to take the risk. I might think the risk of an unfavorable outcome is too high. Plus, most investors have their own dogma around certain things. For example, a fund may never invest in first time founders; they would view that as an unacceptable risk. Whereas another fund wouldn't care either way. Building a business is extremely hard. There are risks all along the way. The risk that you don't get enough customers, that you can't make critical hires, that you can't grow fast enough, that you won't raise that next round, that the competition heats up. Even systemic risks, like economy, inflation, regulation, pandemics. Even the positive outcomes have risks. An acquisition offer that will 3X my check would be life-changing money for you, and I would be genuinely and incredibly happy for you. But it does almost nothing to fund my returns. For me, the investor who is not involved in the business and doesn't even have enough influence to convince you to tie your shoe laces, there is a risk beast around every corner with bloody fangs, waiting to pounce and devour your business whole. I know this. I invest in risky businesses. But I'm not going to take what I see as bad risks. If I'm going to take the risk, then I need to be certain there's a reward. A massive reward. Go back and listen to episode 33, Venture Scale Returns, to better understand this. Here are a few questions you can ask to understand a potential investor's risk appetite for your business. Is there anything here that is a hard no for you? What do you think is the riskiest part of my business right now? What have you seen founders do to de-risk that? Based on what I've shared, is there anything you're still uncertain about? When you dig in to understand their concerns, then you'll know what you need to address either in that meeting or in future meetings. Let's talk about TAM. The massive returns needed to succeed in venture capital is one of the key drivers of the TAM obsession. Bigger markets offer bigger opportunities for growth and bigger exits. Or at least. That's the commonly held belief. When you have an investor hammering on TAM. They might be talking about Total Addressable Market on the surface, but what they're really thinking about is a different TAM: That Aspen Money."Hmm. Is this opportunity, big enough for me to buy that house in Aspen?" The irony of TAM is that the most iconic companies of our lifetime turned a small TAM into an entirely new, massive category. Microsoft in the eighties, AOL and eBay in the nineties, Amazon in the aughts. More recently, LinkedIn New Relic, Twitch. Slack. I could go on and on. I try not to get TAM obsessed. Or more likely, I try to take deep breaths when others get TAM obsessed. It's important. But what's more important is selling an investor on the vision about how your Total Addressable Market becomes That Aspen Money. Here's some questions that you can ask to investors. Have you invested in any companies that are creating their own category or expanding a market category? What worked for them? We see the opportunity to expand our market, what have you seen from your experience that worked or didn't work when doing this? Notice, I'm not talking about exits. I'm talking about the revolutionary work of creating an entirely new segment of business. Of opening up a category for people that are not using these products to start using these products. If you can get an investor to think that your TAM equals their TAM, then you're in business. Another fundraising red flag is the"dribs and drabs round." That is, funding coming in sporadically. For example, if you closed half a million six weeks ago and then had it wired right away. And then closed another 250,000 a week after that, signed and wired. And then another 125,000 signed and wired just a week ago. And you're still out raising. You're six weeks in and you haven't even hit a million dollars, and you're already burning that capital that came in six weeks ago. This is a terrible scenario for you and your investors. Remember the VC Treadmill? Your job is to get enough capital to get from Here to There and level up on the treadmill. With a dribs and drabs round, you don't know if you'll have enough capital to make those key hires or fully execute your growth plan. So your growth suffers. And you've lost out on your best fundraising asset: FOMO. Rather than pooling your capital commitments, you've spread them out and actually disincentivized additional investors from coming in. Fundraising in dribs and drabs is the worst of both worlds. Keep your rounds tight, and focused, and bring everybody into the pool at once. Hey, speaking of pool parties, I'm going to give a shout out here to Jason Yeh and The Funded podcast. I came across Jason's work and his podcast is amazing. We caught up last week, we have so much in common; he also is out there helping founders fundraise better. The Funded podcast interviews founders to learn how they raised rounds, investors to learn how they think about funding, and even has a short form advice section like the VC Minute. He's offering a free fundraising course the week of August 16th. It's a three-day program. Check out the show notes and go sign up for his event and his newsletter. It's rock solid fundraising advice. We have a saying at SpringTime, no, he's the second best answer." We repeat it to remind ourselves that founders deserve the respect of an answer, even if it's a no. Now you may have noticed that not everyone does this. Because, hey, why not mill about the pool for a while? It's not like they're going to get kicked out and they might as well stick around for the optionality. But that sucks for you. I'm going to suggest something that's a classic sales tactic and can be used effectively as you wrap up your round: the takeaway. In essence, the takeaway is,"oh, it looks like you're not interested in buying. I'm going to take this offer away." As you're circling up commitments and coming into your close, go back to all the investors that we're giving you the SHITS, or even ghosted you, and send a simple, polite email. I enjoyed our conversation and wanted to let you know that we're targeting a final close in two weeks. We're determining allocations ahead of that and wanted to be sure you had a chance to hear the update, and make a final decision. If I don't hear back from you, I'll assume that you're out and I won't bother you again. If they don't respond to that. You have your answer. That's a wrap for week eight of the VC Minute. Wow! Week eight. Thanks for sticking with me through all of this. I'm going to do five more episodes next week, and then put a pause on this for a few weeks. I want to say thank you again, to Startup of the Year. If you're a startup listening to this, you should go check out and apply to join their free community. I've been a part of this community for over seven years, in various roles. It's a 100% free community that is deeply rooted in diversity and open to all founders everywhere. VC Minute actually started out as a segment on the Startup of the Year podcast over two years ago. And I'm grateful for the support from the team, as I spun it out into its own show. Startupofyear.com. Sign up and check them out! Have a wonderful weekend. Time is our most precious asset. I'm grateful that you'd spend more of it with me. Thank you. Welcome to the final week of season one of VC minute. I'll be wrapping up a few final thoughts and then take a break until October. Kicking off today, I have advice from my friend, Eric Marcoullier. Eric is a multiple time founder with incredible exits and investments under his belt. He now coaches CEOs full-time and blogs at obviousstartupadvice.com. Definitely go check it out and subscribe to this blog. My favorite post of his, of all time, is this. A CEO Has Three Responsibilities. One, communicate the vision. Two, hire great people. Three, never run out of money. I'd argue the two and three are actually derivatives of number one, and that a founder truly only has one job: sell the vision. Need to hire great people? Sell the vision. Don't have enough capital to pay those people what they can earn elsewhere? Sell the vision. Never run out of money? Well, you get money from two places, customers and funders. Want to win and retain customers even as your product is not completely solving their pain? Sell the vision. Want to convince big corpo to take a chance on a small startup? Sell the vision. Want to raise capital? Sell the vision. Want to throw the hottest pool party in town? You guessed it, sell the vision. Remember the,"you had one job" memes?. Well, VC Minute is bringing it back like it's 2013. Startup CEO, you had one job: Sell. The. Vision. If the VC Treadmill is the process of raising money, to grow your business, to hit milestones for the next round of growth, then what happens when you miss your milestones? You have three choices. One, raise the dreaded bridge round. I mean, excuse me, an insider round. Two, go out of business, including various forms of acquisition. Or three, adjust your business to focus on breakeven or profitability. I think the cool kids are calling this"default alive." Even in my limited experience, I've seen all of the above happened to great founders. Let's talk about the third case adjusting for breakeven. Just like being on a treadmill at the gym, you can slow down the VC Treadmill at any time. You're in control. I want to tell you about one portfolio company that took a hard look at their business when COVID shut the world down in early 2020. They pulled way back on burn rate, they took salary cuts, stopped new hires, cut extraneous lines of business, and dug in deep to focus on their core business. As the year progressed, many startups saw breakout successes, preemptive rounds, and there was abundant capital. But this team kept their heads down and focused. By the end of the year through their grit, determination and intense focus on unit economics, they turn the year around. They grew revenues got back to full salaries, plus expansion hires, all supported by a stronger business model with lower churn. They then topped it off by raising a Series A in late 2021, on their terms. We couldn't be more proud of them. When you take growth capital, you have a responsibility to your investors to do everything you can to hit those milestones. But if you miss this, you don't have to burn it to the ground. You can pull back, slow down and refocus to emerge with a stronger business. Whether you've already raised venture capital or are considering it, remember, you're still in control of the business. That is. As long as you have control of the board. But that's a topic for another time. One of the things we're going to do in season two of the VC Minute is share new voices and different perspectives with you. Kicking that off today. Is my teammate, Allyson

Allyson: 43:10

Hi, my name is Allyson Plosko and I'm a Principal at SpringTime Ventures. I'm excited to be hosting today's episode of the VC Minute, Building An Investor's Confidence In You. If you've heard it once, you've heard it a thousand times, at the seed stage, the strength of the CEO and co-founders is one of the most heavily weighted pieces of criteria in the investment decision making process. This is especially true for companies with zero to little revenue. Regardless of how big the potential market is, if investors aren't convinced this is the team to tackle this particular problem, it's always a pass. However, it's rare to see an investor give this feedback because doing so without making it seem like a personal attack is a bit tricky. Yet, there are concerns that erode investors' confidence that aren't personal at all, and in fact are completely feasible to tackle with practice and preparation. Examples of these correctable founder red flags include muddling the story. If it's 10 minutes into a conversation and an investor still hasn't quite figured out the problem you're solving, the solution you're building or the value prop, that spells trouble. Usually confusion stems from too many details that don't matter, or not connecting the dots to the important pieces that do. Remember, from an investor's perspective, an unspoken part of the pitch is evaluating whether you can sell the vision of your business. And a key part of that is effectively communicating why your business exists in the first place. A second red flag is not knowing your numbers. How much revenue did you do last month? How many contracts have you signed? How many people are using your solution? You should know the basic relevant metrics for your business, cold. If you stumble through these questions it gives investors pause that you're as tuned in as you need to be. The final one is not communicating. Investors know that fundraising isn't a CEO's full-time. But when you're running a fundraising process, it should be a top priority and reflected in the speed of your communication. If you need more time to follow up on something, just drop a note with a new timeline. You're running a business and investors are forgiving when things arise, just don't disappear for weeks and expect things to be okay when you finally do resurface. Investors are looking at how you communicate pre-investment as an indicator of what you'll be like to work with post investment. Quite frankly, mastering these three areas is table stakes for successfully raising a round. Give yourself a fighting chance and build an investor's confidence in you as a founder by refining your pitch with trusted individuals and your network, reviewing your key business metrics and promptly following through on request.

Rich: 46:05

The vast majority of investors you pitch will pass. If you pitch a hundred investors in 30 minute initial calls, that's 50 hours, an entire work week. And to what do you have to show for it? In the four plus years we've been investing, a significant portion of the pitch meetings have been spent with founders spending 25 minutes of walking through every painstaking detail in their deck. Then when we get to the end and I ask, what questions do you have for me? I get some flavor of what's your typical check size? Our check size is on the website! This is a missed opportunity. You need to learn something from every pitch. And you do this by asking good questions throughout the pitch. You can get feedback on the pitch itself. What did you think of my pitch? Or what didn't we cover that you're still wondering about? You can ask for specific advice. What do you think of our plans to scale? What have you seen that hasn't worked with this customer acquisition strategy? Or ask general advice. What's a major pitfall you think we're heading right for? If you were on our board, what would you recommend we focus on? After you spend time on introductions and small talk, start out by asking questions about the fund. What's important to them and their process? Then pitch to the deck for eight to ten minutes. And use the last 10 minutes to ask questions about your business, to learn something from them. You could tee it up by saying, even if we end up not being a fit for you, you've seen so much, and I'd love to learn from you by asking some questions about our business." Make sure that you're getting something out of these pitch meetings other than just... pitching another investor. Try to learn something, gather that feedback. The irony is that if you ask insightful questions, it reflects better on you than if you were to just talk at me for 25 minutes straight. So learn something from every pitch. As I close out the inaugural season of VC Minute, I want to end on a positive note, venture capital and validation. Venture capital does not validate your business. More importantly, lack of venture capital does not invalidate your business. The purpose of a business is to sell goods and services, to create something of value for your customers. Yet we live in this crazy world where venture funding is celebrated like it's the ultimate business success. As a sidebar, I can sort of understand why this is. As a private company, you don't want to report your revenue to the public, but you can share an approximation for that: venture funding. You can show prospective customers and prospective employees that they can rely on you because you have investment. At least that's my theory. I digress. The purpose of venture capital is to pour rocket fuel into your business to accelerate your growth. That rocket fuel may cause your business to explode. In the"explode into a million little pieces and leave nothing behind, but a smoldering hole in the ground" sense of the word explode. That's smoldering hole in the ground that contains the ruins of your startup hopes and dreams, is an accepted outcome of the venture capital business model. Wow. I wanted to end on a good note and this just took a really dark turn. I'll come back to the point. Venture capital is a specific financial instrument that pairs well with hyper scalable business models. But not all and not always. If you're struggling to raise venture capital, take heart. It does not invalidate your business. If you truly want to build this business, then you must focus on creating value for your customers. That is what matters. Raising a million or a hundred million dollars doesn't mean shit if you're not serving your customers. Founders go build something of value. Find that future state of the world where your products solve real problems. Let your customers lead the way. And pull us all towards it. I want to see you succeed because I want to live in the future that you've made better and brighter. Thank you for your hard work. Thank you for listening to Season One of VC Minute. I have such immense gratitude that you came with me on this journey. If you enjoyed it and found it valuable, please leave a rating and review. And let me know what you want to hear in Season Two. As I always say time is our most precious asset. Thank you for spending some of it—a lot of it— with me. We'll be back in a couple of months with a whole lot more to say!