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How to Make an Introduction to a VC or Investor

Over the last year I’ve been getting a lot of introductions and requests for intros to other investors. I’ve been surprised by the low quality introductions some people make so I figured that writing a little about what makes a good investor introduction could be useful for the connectors out there.

Making the Right Introductions

Just because someone asks you to connect with someone isn’t a good enough reason to actually make the intro. Think very carefully about whether there is a fit between the two people. If someone you know has an “idea” and asks you for a connect to a VC, and you know that the VC doesn’t invest in “ideas” then feel free to tell that person that you’d be happy to make the introduction at a later date, when they are past the “idea” stage. Don’t forget to explain why the introduction might be premature.

You should also feel free to ask the person asking for an introduction, why they want an intro and if they are prepared for the connection (point them to 10 Things to Consider Before Approaching a VC).

What Making an Introduction Means

When you make an introduction to someone, the process has significant implications for you. Let’s think this through a little:

  1. You know person A that others are trying to get access to.
  2. Person B knows you and is trying to get access to person A.

You’re the gatekeeper. You should be thinking about how well do you know person B. Is person B an awesome person or is person B, not-so-awesome? If person B is not-so-awesome or you don’t know them that well, it’s ok to decline the request for an intro. You can say something like, “I’m sorry, but I don’t know you well enough to make the introduction.” Person B may not take it well, but, they’ll get over it.

Next. How well do you know person A? If person B is trying to get access to person A, chances are that others are also trying to get access to person A. What does this mean? Person A is probably getting more introductions and cold calls than they can handle or want.

If you do successfully wind up making the intro and if person A is not impressed with the intro, it will hurt your ability to make future intros and it will impair your ability to make the connection with person A stronger.

On the flipside, if person A turns out to be not-so-awesome and doesn’t gel well with person B, you haven’t lost much, but the chances of person B appreciating your spent social capital in making the intro is minimal.

Spending and Building Social Capital

As you meet new people, it’s important to nurture those connections. How to nurture them depends on the context of the connection. However, at a very basic level, you should be building trust. Building trust/social capital takes considerable time and effort.

It’s much easier to “spend” your social capital by making introductions when people ask for them because:

  1. You may just want to be a nice person
  2. You may want to be able to prove that you are a well connected person
  3. other reasons

However, do think very carefully before spending that social capital because it could either multiply when you make good intros or disappear when you make bad ones.

two businessmen shaking hands

Picture by MyTudut, on Flickr

Sample Intro 1

Below is an introduction I received a few months ago from someone I barely knew (names are changed).

Hi Pankaj,

[FRIEND A] is a friend and client to me. He has been involved in couple of web sites and businesses.

He is currently looking for some investors and VC’s. He shall connect with you with his requirements and please try to help him with investment.

[MR. CONNECTOR]

Why wasn’t I impressed or looking forward to this intro.

  1. Weak Connection: I have never met or spoken to “Mr. Connector”. I have exchanged emails with Mr. Connector when he wanted to volunteer for Startup Weekend. In the end, he went dark, never showed up. Never did anything.
  2. No understanding of investment thesis: He made no effort in the email to understand what I was looking for as an investor, what my thesis was, etc.
  3. No signal: He didn’t spend any time qualifying the person asking for the intro and signaling that info in the email.
  4. No context: For all I knew “FRIEND A”, could be asking me to invest in his gold buying business.

“FRIEND A” eventually emailed me as well

Hi [MR. CONNECTOR],

Thanks for the Introduction

@Pankj Nice to e-meet you,

We are currently developing ad network platform and will be launching it soon.

If we get an first round or angel investor I would be really glad and helpful, let me know what would you need from me to proceed for funding, I will arrange ASAP.

Best Regards,
[FRIEND A]

Yes, the email is copy and pasted exactly as it was received and yes, “Friend A” didn’t take a minute to check the email he sent realizing that he misspelled my name. Generally not a big deal but when you’re first connecting to someone, you want to put your best foot forward. In any event, I took a few minutes and responded to “FRIEND A”.

Hi [FRIEND A],
1) what’s your angellist profile?
2) what’s your LinkedIn profile?
3) what businesses have you been in and what have you done?
4) send me your investor deck
5) how much are you planning to raise?
6) what kind of ad network are you building?
7) why are you building another ad network?
8) how many customers have you brought on board for this ad network?
9) how many ad impressions have you shown this far and across how many sites/devices/etc?
10) are you raising via equity or convertible?

Pankaj

I never heard back from Mr. Connector or Friend A after asking them the questions above.

Sample Intro 2

Here’s an intro I received a few weeks ago. We are friendly even though we don’t know each other very well. However, I really respect him and the work he has done (again, names, numbers, details changed).

Hey Pankaj

Hope your’re doing good. I though of putting [ENTREPRENEUR] in touch with you. I’ve know [ENTREPRENEUR] for some time now and he is doing a startup called [STARTUP NAME] [URL]. They are beginning to see good traction ([ >25K ] signups to date) and their team has good product / engineering capabilities. You can check them out for 500startups, or even otherwise.

[ENTREPRENEUR]… Pankaj is a friend … you should sync up with him.

[MR. CONNECTOR 2]

Do you see a clear distinction between example 1 and 2

  1. Clear demonstration of connection strength: He clearly says that he has known “ENTREPRENEUR” for quite some time.
  2. Context: He may not explain the context but he gives me the name of the startup and gives me the info I need to look into the startup and do some research before taking the intro. He also indicates a potential fit with 500 Startups which is helpful for me.
  3. Traction: He gives me clear traction data points which I can draw my own conclusions from as well as indicative info about the product and engineering capabilities.
  4. Clear call to action: He gives the entrepreneur a clear call to act.

Based on this intro email, a dialogue has started between the entrepreneur and I. We are planning to meet soon.

What are some of the things you would recommend people think about when?

  • Asking for an intro
  • Making an intro
  • Taking an intro

Leave your tips in the comments below.

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10 Things to Consider Before Approaching a VC

A lot of very very smart, experienced investors have put similar information out there over the last few years. If you’ve read it before, consider this a reminder. If you haven’t read it before then consider this a starting point. This post shouldn’t be seen as a comprehensive list. It’s more of a response to various pitches I’ve been getting from multiple sources over the last month.

“Understand the investor’s mandate, fund size, investment reqs. Pitch the right investors and build releationships with others” – TJ Sassani, Founder of Zozi.

  • Research

  • Before going out and trying to approach investors, take the time to create a spreadsheet of the various investors you want to approach. This will be your scrappy CRM for managing your investor pipeline. Some of the columns in your spreadsheet could be:

    1. Why you want them to be investors
    2. Can you get an intro to the investor from someone that the investor knows and trusts
    3. Have they invested in your market in the past
    4. At what stage do they typically make investments
    5. What is the fund size
    6. What is their typical check size
    7. What criteria do they use in determining if you’re a fit for them

    Once you’ve built this matrix (and customized it according to your needs), filter out the investors who don’t invest in your market or don’t invest at the stage you are at. Then look at the other criteria and keep filtering. Once you’re down to a list of investors that have an investment thesis that your company would fit into, begin your approach. You may want to consider speaking with the investor that is least likely to invest in your company first. Pitch them and get feedback. Incorporate that feedback into your pitch. Become awesome (if you aren’t already) at your pitch each time you pitch someone new and move up the ladder. The investor you want most to be in your current round should be the last one that you pitch to so that you’ve received enough feedback to make your pitch really awesome.

  • Connecting with Other Founders

  • This is something that you should consider doing as part of your research. Try to connect with founders that have raised money from some of the VCs in your pipeline. Connect with them, meet with them if possible and discuss very specific questions that will give you some insight into the VC and if there is a fit with you, your company, the stage at which your company is at, specifics that you would like the VC to help with and what the VC can help with. Finding what companies a VC has invested in is usually not that difficult. A good place to start for recent investments is AngelList.

  • Understanding a VCs Motivation and Economics

  • VCs typically invest in many many companies. Out of the investments they make, the majority don’t yield positive outcomes (check out this report by the Kauffman Foundation). Hence, most VCs need to invest in companies that are going after large opportunies, have balanced teams, focus on execution and have a higher probability of a large positive outcome to help offset some of their losses. There are many reports/blogs/articles and books that talk about the economics behind VC funds and I would urge founders to read as many of these as possible before approaching VCs. If you haven’t read this post by Mark Suster yet, you should.

  • Market Opportunity

  • One of the most important things that founders need to think about and understand is the fact that investors, generally, need founders to go after large markets. If the market you’re targeting is Rs. 500 Crore and it’s not growing rapidly, then opportunity isn’t large enough to go for venture funding. Even if your business winds up controlling 80-90% of a Rs. 500 Cr market, the market is still too small and wouldn’t yield a large enough return for the VC. For example, after dilution, if the investor winds up holding 10% of your company, in the best case, it would probably not be worth more than Rs. 100 Crore. Something like this would make a great lifestyle business, however. So think about your market carefully before deciding to raise venture funding.

  • Ideas Vs. Products with Traction

  • Ideas are a dime a dozen. They don’t matter. What matters is execution and traction. If you’re looking for funding at the idea stage, you had better have strong successes in the past. Most investors (VCs and angels) won’t invest in ideas. They want to see that you’ve built something and that you have some measurable traction and possibly, some defensible intellectual property that’s worth something. If you have a revenue stream, even a small one, already in place, it adds significantly to your chances of getting investors interested.

    If you’re at the idea stage, talk to as many people as will listen about your idea and get feedback. Learn as much as you possibly can during this time and don’t worry about someone stealing your idea. Chances are, people have thought of similar ideas, they just haven’t done anything with their ideas. Don’t be that guy. Go build your idea.

  • Investments in Your Vertical

  • It’s important that you spend time understanding if the VC you’re approaching has done investments in your vertical. For example, e-commerce is a very broad vertical. It may be sufficient to determine that VC X has invested in e-commerce companies in the past hence, your e-commerce business selling gourmet chocolate online fits in to their investment thesis. However, to be really prepared before approaching them, you may want to research if they have invested in online food ordering or other food and beverage related businesses before. It can only help if they have.

  • Investments at Your Stage

  • Making sure there is a fit in the life cycle of your startup and what VC X typically invests in is critical. For example, if you just launched your prototype, have 1000 users on board and are looking to raise 50 lakhs in funding, you probably shouldn’t approach a VC who does much later stage and larger deals. At your stage, you are probably better off approaching an accelerator program.

    At the same though, you shouldn’t shy away from connecting with and building relationships with investors that may be a better fit for later stages in the lifecycle of your startup. Everyone is busy so don’t despair if an investor declines to “have coffee” with you. Keep trying.

  • Get a Refferal

  • I can’t stress this enough and I’m sure you’ve heard and read about this multiple times. Read it again. Get a referral to the VC(s) that you’re targeting. What does this mean? Well, it means that you need to start thinking very early on about some of the VCs that you want to approach. Find out who do you know that knows them – founders, mentors and/or advisors in some of their portfolio companies, angel investors that co-invest with them, etc. Start building relationships with these folks early on. Don’t expect to meet someone once or twice and ask them to make an introduction to a busy VC. It doesn’t work like that. If you ask someone for a premature introduction, you will most likely turn that person off and they may be unwilling to help you in the future.

  • Your Pitch Deck

  • Assume all of the other items above have worked out well and you’re ready to start connecting with the VCs in your pipeline. Sending an email detailing what your business is and who your team is, etc. is not a good way to start the relationship. Remember, you’re not the only person the VC is speaking/meeting with. Most VCs are extremely strapped for time. After getting the introduction, send over a deck with some very simple but impactful slides. If you’re going to send over 20 or 30 slides, don’t expect it to get even a glance. Start with Guy Kawasaki’s 10/20/30 Rule and after that, take a look at The Triple Play of Presenting and Dave McClure’s 10 tips for the perfect investment pitch.

    I would make a slight modification to this. If you have any traction, e.g. number of users, number of downloads, revenue, etc., then you should start the first slide with this data. If I open a deck and I see some meaningful (though early) traction, I’m more inclined to go thru the rest of the deck to see what other pleasant surprises are contained in the deck. Move the “Problem” slide to the second slot and the “Solution” slide to the third position. Move the “Team” slide to the second to last, right before the “Money” slide. Rip out the projections slide for some early investors but keep it in for other later stage investors unless you have some traction on the revenue side and can make actual projections. Most early stage projections are completely useless so let’s not event waste time on them.

  • AngelList

  • If you aren’t using AngelList, you’re losing out on an incredibly valuable resource for connecting with investors. I’ve done a few talks in New Delhi/NCR about the importance of AngelList for Indian startups and I think many Indian founders are beginning to see the importance. Though it’s a chicken and the egg problem with regards to Indian founders and Indian investors on AngelList, the one thing that you can be certain of, is that many many US investors are on AngelList and they are watching India closely. The boundaries and borders are coming down. More and more US based investors are getting active in India (we’re one of them) and AngelList gives you a direct line to them. Long story short, before contacting an investor, make sure you have a properly filled out AngelList profile ready to go. Include your AngelList profile, Twitter and Facebook in investor communications. It helps them to get to know you and see what’s happening.

So what do you think about these tips? Any more to add?

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11 Tips on Pitching an Investor, Mentor, etc.

Over the last few months, I’ve Been hearing lots of pitches from entrepreneurs. Before going on, I want to say, congrats to all of you on taking the leap towards building your businesses.

That being said, I want to tell you that most of your pitches suck! 75% of the time I want to go to sleep after the first 3 minutes. I guess it’s not your fault (the education system in India never really teaches public speaking). Do the research. It can only help you. Don’t “read Facebook” (I had to put that in. A lovely quote from an entrepreneur I recently met.)! Go read some incredible posts by people like Mark Suster, Dave McClure, Eric Ries, Brad Feld, Fred Wilson, etc.

I’m no pitch expert but here are a few pointers from what I’ve learned over the years.

  1. Do some research on the person/people you are pitching to and understand, as best as you can, their perspective BEFORE walking into pitch them.
  2. Start with the problem. In two to three sentences, explain what is the problem. If you can’t do it in three sentences, stretch it to five but get the problem across in e first thirty to sixty seconds. If you can’t hook the other party and help her identify with the problem in sixty seconds, you will lose them for the rest of the meeting. Check out this post by Dave McClure
  3. In another sixty seconds, explain your solution. Don’t take five minutes to do this. Sixty seconds to ninety seconds is the most time you should take to explain your solution.
  4. Don’t make up jargon that doesn’t fit with the industry vertical you are talking about. For example, I had two entrepreneurs working in the travel space talking about products and content and I’m thinking souvenirs and TripAdvisor. They were actually talking about customized city tours and concierge services. That was ten minutes of my life that I was never getting back. Stick to terms people identify with your industry. It makes it easier for people to follow along.
  5. Practice! Practice! Practice! Record yourself pitching on a video camera or webcam and watch it over and over. Critique yourself objectively and repeat. Share it with friends or family and see if they ‘get it’. Got to startup events like Startup Weekend where you can do 60 second pitches as well as long form demos and presentations.
  6. Refine your pitch every time you do it. Don’t stick to what you always do. If you have done 1), then you should be able to do your pitch in a way that resonates with your audience
  7. If the person you are pitching starts asking questions, that’s a good thing. You want them to interrupt you and be engaged. This means they are interested and/or trying to help. Don’t try to get thru the rest of your mental pitch in a specific order. Engage them in a discussion about the problem and your solution. (Check out Dave McClure’s talk ‘How to Pitch a VC’ from Startup Weekend Delhi)
  8. Be prepared to pitch without a deck. If you have one, pull it out but a demo is far more interesting if you really need to show something.
  9. Show passion! I find this incredibly important. Most of the entrepreneurs I come across in India may be passionate, but they don’t show it. Speak with conviction and show your passion about your idea, your business, and your team. Emotions can work in your favor if you do it right.
  10. Be open-minded. I may not know as much about your industry as you do but if you asked to meet, consider my suggestions with an open-mind. I may surprise you 🙂
  11. Don’t pretend to know what you don’t know. It makes you look more foolish than if you honestly say you have no idea what I’m talking about. You won’t believe how many times people pretend to know and follow Eric Ries‘ Lean Startup methodology but really know nothing more than buzzwords. If you don’t know something, it will show so don’t pretend.

Check out these additional resources:

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Join Geeks on a Plane on a Trip to the Taj!

If you’re a startup and would like an opportunity meet, pitch, and hang out with 20-25 serial entrepreneurs, investors and startup ecosystem stakeholders from Indian and Silicon Valley, including Super Angel, Dave McClure, please fill out the form below by Friday December, 9th and we will let you know if you’ve been selected to send a representative or two! Travel and lodging will be sponsored by Geeks on a Plane!

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Startup Weekend India – The First Six Months

The first round of Startup Weekend events in India came to a close in March. Startup Weekend Delhi was held at the American Center from March 4th till March 6th 2011 and Startup Weekend Bangalore was held from March 11th till March 13th 2011 at Microsoft’s Signature building.

September 2nd 2011 marked the beginning of the next round of Startup Weekend events across India. Startup Weekend Hyderabad was held at ISB from the 2nd – 4th of September. This was the first SW held in Hyderabad and we honestly didn’t know what to expect. We had only sold 25 tickets in the first 2 months that ticket sales were open. In the last three days before the Friday night pitches, we sold over 50 additional tickets.

I’ve seen lots and lots of “me too” ideas and quite a few “ho-hum” ideas. There are some decent ideas with very little depth prior to SW. Startup events in India need to be about team formation, experience building and experimentation. Between these three events, Startup Weekend has kicked off 39 teams of entrepreneurs, techies, designers, and business people. Granted, out of these 39 teams, probably not even four will survive more than a year but that’s not the point. The point is that these 175 or so people, will be better entrepreneurs the next time around.

I believe these three events did something that no other event in India has done so far. It showed people that they CAN execute their ideas in a very short span of time. With complete strangers, in most cases, they can put together a business case and build a prototype to showcase to potential investors.

In a few cases, teams from Startup Weekend in India have had discussions with investors directly as a result of Startup Weekend. One of the biggest pain points for many entrepreneurs in India has been funding and Startup Weekend in India has helped ease this pain point in a small but important way.

Startup Weekend has also shown investors that entrepreneurs, techies, designers can do some really interesting things in a short period of time if all the ingredients are there. It’s created potential deal flow for early stage investors starved for invest-able ideas teams. Already, Startup Weekend clones are popping up across India.

The confidence and the energy that people have displayed at Startup Weekend in Delhi, Bangalore and Hyderabad has been quite contagious. Techies were pushed to deliver minimum viable products and marketers and business people were forced to come up with viable plans in a very short time span. In just a weekend, many people were able to successfully deliver business cases and prototypes. Having done so has shown them that they CAN, in fact, put together teams of the right people and deliver. Being able to find co-founders that can execute has given people the confidence needed to take their ideas from Startup Weekend and pursue them.

Another very important factor was the presence of great mentors that spent considerable amounts of time with the business, techie and design members of each team, helping them develop various aspects of their ideas and the technology being employed. Many of the mentors present have exhibited interest in helping future teams in the same way. Even some panelists have shown interest in being mentors and working with the various teams throughout the next Startup Weekends in India. However, some mentors and panelists have also been disappointed by the lack of depth in the ideas.

I have found that for entrepreneurs in India finding the right co-founders and having mentors to help guide them through the various pitfalls that they continually faced is a continuous problem. Of course, funding issues are an issue everywhere but in India, it’s far more pronounced. To me, the idea of getting the right people with similar mindsets and mentors, serial entrepreneurs with significant experience in a room with raw ideas and oodles of enthusiasm was what people in India have been missing. Bringing all these components together, mixing them up, laying down some rules and bending a whole lot of others has given people who had very little chance of execution or success an opportunity to try their ideas in a safe and risk-free environment. In essence, the Startup Weekend philosophy is helping Indians try out ideas without quitting their day jobs, find people who buy into their ideas, and have people around to immediately guide them in their execution.

Personally, Startup Weekend has given me an opportunity to return to India and give back something that I’m very passionate and excited about – entrepreneurship. The opportunity to help entrepreneurs, both young and old, realize that they can and should take a chance on themselves and their ideas is a great feeling. Instead of just telling them that they should, Startup Weekend has given me a chance to show them that they can. If my contribution to the Indian entrepreneurial ecosystem can help create even one startup out of each event, I believe I’ve given back more than I could have hoped for.

India is a difficult place to understand, with all of its contradictions, it’s rapid modernization, it’s pathetic infrastructure, it’s volatile stock market, it’s real-estate market that defies all logic, it’s incredible wealth and it’s dire poverty. However, India has been a land of entrepreneurs with it’s small businesses, it’s kinara stores, it’s newly minted multi-national corporations. In the last twenty years, much of the entrepreneurial spirit that’s in India’s blood has been lost. Mostly because better opportunities to make money presented themselves with the IT, ITES, call center and other service businesses. However, I believe a new generation of entrepreneurs is emerging. India is draining entrepreneurial and engineering talent from other parts of the world. It’s not just Indians or people of Indian origin coming to India, it’s the Chinese, the Koreans, the Japanese, the British, the Americans, the French, the Germans, the Italians and everyone else in between who are contributing to a new entrepreneurial culture.

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