As an entrepreneur, pitching your business idea to a venture capital (VC) firm can be an exciting, yet daunting experience. You may have spent weeks or months crafting the perfect pitch deck, practicing your delivery, and researching the firm's investment portfolio to ensure that you're well-prepared. However, after presenting your business idea, there is one question that you should always ask the investors: "Are we the type of company your fund would consider investing in?"...
This seemingly simple question can provide a wealth of valuable information that can help you in your entrepreneurial journey. Let’s explore why this question is so important, and how you can use the answer to your advantage.
Why This Question Matters
Firstly, it shows that you’re aware of the VC’s investment criteria and are interested in ensuring that your company aligns with their interests. VC firms typically specialise in specific sectors, stages, or geographies, so it’s important to ensure that your business aligns with their investment focus. This can help you avoid wasting time pitching to investors who are unlikely to invest in your business. For example, if a VC firm is focussed on early-stage technology companies, it may not be a good fit for a later-stage healthcare company. By asking if your company is the type of company they would consider investing in, you can quickly determine if there’s a potential fit and move on to other potential investors if necessary.
Secondly, asking this question can help you gain valuable insight into what the investor is looking for in a potential investment. This can provide you with feedback on your pitch, business plan, and overall strategy. Understanding the investor’s investment criteria can help you adjust your strategy and pitch for future presentations, as well as highlight key metrics, milestones, or growth opportunities that align with their interests. For example, if the investor is looking for companies with a strong team and clear path to profitability, you may want to emphasise these aspects in your pitch and adjust your strategy accordingly. By asking this question, you can use the investor’s feedback to refine your pitch and increase your chances of securing funding for your business.
Thirdly, asking this question can help you build a relationship with the investor. By showing that you’re interested in their investment criteria and value their expertise, you can establish a positive rapport that may be beneficial in the long run. Even if the investor ultimately decides not to invest in your company, they may be able to provide valuable advice, connections, or feedback that can help you in your entrepreneurial journey. Building a relationship with investors can also be beneficial in the long run, as they may be more likely to refer you to other investors or provide follow-on funding in the future if your company has evolved sufficiently to meet their investment criteria.
How to Use the Answer to Your Advantage
Once you’ve asked the question, “Are we the type of company your fund would consider investing in?” it’s important to listen carefully to the investor’s response and ask follow-up questions if necessary. Here are a few ways that you can use the answer to your advantage:
1. Understand Their Investment Criteria
If the investor says no, it’s important to understand why. Ask follow-up questions to get a better sense of their investment criteria and what they’re looking for in potential investments. For example, you could ask:
- What sectors are you currently focused on?
- What stage of companies do you typically invest in?
- What geographies are you interested in?
- What specific metrics or milestones do you look for in potential investments?
Understanding the investor’s investment criteria can help you adjust your strategy and pitch for future presentations.
2. Highlight Why You’re a Good Fit
If the investor says yes, it’s important to highlight why your company is a good fit for their investment criteria. You can do this by highlighting key metrics, milestones, or growth opportunities that align with their interests. For example, if the investor is interested in companies with strong monthly recurring revenue growth, you could highlight your revenue growth over the past twelve months and how you plan to continue this growth in the future.
3. Build a Relationship
Whether the investor says yes or no, it’s important to build a relationship with them. Follow up with them after the meeting to thank them for their time and provide any additional information that they may have requested. Keep them updated on your progress and milestones, and continue to seek their advice and feedback.
Building a relationship with investors can take time, but it can be invaluable in the long run. They may be able to provide valuable connections, advice, and follow-on funding as your company grows.
Asking the question, “Are we the type of company your fund would consider investing in?” may seem like a simple question, but it can provide a wealth of valuable information that can help you in your entrepreneurial journey. By understanding the investor’s investment criteria, highlighting why your company is a good fit, and building a relationship with them, you can increase your chances of securing funding and building a successful business.
Remember that not every investor will be a good fit for your company, and that’s okay. By asking this question, you can quickly determine if the investor is a good fit and move on to other potential investors if necessary. Keep refining your pitch, strategy, and business plan, and stay persistent in your pursuit of funding. With hard work and determination, you can find the right investors and build a successful business.
How We Help Entrepreneurs
Our mission at Déjà Partners is to empower and support the best entrepreneurs and early stage companies. We understand the challenges and risks involved in starting a new business from scratch and are dedicated to providing mentorship, guidance, and support to help you succeed. Our services are offered on a pro bono basis, meaning there’s no cost to you.
We begin by working closely with you to prepare for a successful fundraising with institutional investors or debt providers. Drawing on our wealth of experience in building businesses, we provide valuable insights and feedback to help you refine your business plan and pitch. With our guidance, you’ll be well-positioned to attract the right investors and secure the funding you need to bring your vision to life.
But our support doesn’t end there. We’re committed to helping you navigate the challenges of scaling your business to create value and achieve your goals over the long-term. As seasoned entrepreneurs ourselves, we understand the highs and lows of building a business and can provide valuable advice and support along the way. Our goal is to help you mitigate against the prospect of failure so that you can approach your business journey with growing confidence and optimism.
At Déjà Partners, we’re passionate about helping entrepreneurs turn their visions into successful businesses. Contact us today to learn more about how we can help you achieve your goals.