It’s too early to determine whether the fall of SVB heralds a new era for venture capital, but based on anecdotal evidence, off-the-record discussions and discussions with colleagues, it appears that we are back to business as usual where fundraising for startup before revenue. anxious.
Not a scientific sampling, but several investors signaled on Twitter this week that they remain interested in talking to founders who are still at the idea stage. My hot take: With contagion included, does the VC community feel comfortable writing small checks to startups that have had pre-revenue, but Series A and above? More or less.
As long as this decline continues, this Q&A for investors will be a monthly TC+ column. If you’re a recently laid-off worker considering going 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 to read and share .
Thank you so much to all the investors who took the time to answer these questions in such detail! If you are an early stage investor who would like to be featured in future columns, please email guestcolumns@techcrunch.com with “How To Feature Me” in the subject line.
Here’s who attended:
- Brian Backeen, General Partner, Lightship Capital
- Masha Bucher, Founder and General Partner, Day One Ventures
- Rebecca Liu-Doyle, Managing Director, Insight Partners
- Clelia Warburg Peters, managing partner, Era Ventures
- Nick Adams, Managing Partner and Co-Founder, Differential Ventures
- Lisa Lambert, Founder and President, National Grid Partners
- Elizabeth Yin, Co-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 pursue opportunities in that space.
How do you prefer to be approached by a founder with their initial pitch: a cold email, a warm intro, or some other method?
We have an online portal at lightship.capital that founders can use to apply for investment. We do this to prevent a problem with venture capital investors called “network bias.” Founders should apply on our portal and proceed Twitter.
What’s one traditional fundraising tactic that founders should remove from their toolkit—something that no longer works but is still common practice?
Asking for warm introductions and trying to “build a relationship” 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. When during their pitch did you realize you were going to invest?
I was recently introduced to a company called MuseTax. Great founders, domain experts, the real deal. They made me want to invest within the first 10 minutes. I am in the stagecoach now.
Can you share a tip that can help a first-time founder stand out?
Don’t focus on investments; focus on design. Don’t let engineers build you an ugly product with great password reset functionality but limited user value.
Don’t let the engineers tell you it’s not ready; It 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 a lot of engineering bills and no progress.
What are you reading/watching/listening to now?
I keep rewatching season 1 of “Billions”. You know, before it gets weird 🙂 Great show.
Masha Bucher, Founder and General Partner, Day One Ventures
What kind of investment opportunities are you looking for in March 2023?
In a healthy fundraising environment, the founders who do best often rely on their storytelling skills and can win over investors with their charisma. They are the ones who are naturally good speakers and are articulate with their vision.
There is a second type of founder with a different background. They are often head down, scrappy 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 types of founders to support during a downturn. They were driven to be rooted and survive all their lives; they are specially equipped to deal with what the current times demand of them. They are good at making something out of nothing and are extremely cost effective.
I look for paths to monetization, business models and paths to profitability. Investors pay much more attention to numbers, business models and how founders manage finances. Expect many more questions that challenge the business model.
I look at how much revenue comes from product quality versus marketing. Founders who generate virality based on product quality show they can make money with little marketing spend.
We like companies with high EBITDA. We love companies like Quinn, who have grown to millions in revenue in just one year since launching with zero-cost, viral marketing on TikTok.
How do you prefer to be approached by a founder with their initial pitch: a cold email, a warm intro, or some other method?
Cold emailing works great, but it’s surprising how few people can get it right. In a cold email, every sentence should convince me to take a meeting. With every word and every sentence, you need to make an investor want to know you personally. You need to show a clear reason why they need to meet you now, not next month.