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Advice Entrepreneurship Startups Venture Capital

Founders Doing Due Diligence On Investors

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Doing due diligence on investors is something that should be discussed more frequently. It’s important for founders to take the time to understand who the investors are, how do they help and support the companies they invest in, how do they react when things aren’t going as well as hoped for.

Spending some time doing due diligence on potential investors can save you lots of grief in the long run. I’ve talked about this often and it’s great in theory but it’s not as easy to do in person. Now that I’m back on the operating side of a startup, here are some tips on how to diligence possible investors:

  • Start with making a list of the investors you think would be interested in your startup keeping a few broad things in mind (use a spreadsheet or a CRM)
    • Vertical the company is in and is the VC firm + partner interested in the space
    • Stage of the company and does the firm invest at this stage
    • Check size that you’re looking for and what the firm writes
    • Any existing competing investments that the firm has made
  • Find people you know that may be connected to these individuals
    • Have a prepared email that you can send to the people you know who can possibly connect you to these investors. The email should be a very short email that explains why you would like to connect to the investor, a summary of your startup and have a teaser deck attached. Some people like to use DocSend but I prefer a PDF.

Once you’ve exhausted your personal network, find 5-10 founders that the firm and the partner have invested in (ideally should include failed startups).

  • Reach out to them on social media, via common contact or a cold email to see if they will chat with you about your startup and provide some advice on your round as well as share some info about the investor(s). If they say yes to a meeting, do some research on them, e.g. understand what their startup does, maybe check out the product, use Crunchbase to get an idea of some of their investors, how many rounds they’ve raised, you can use tools like Workomo (shameless plug) to get some background about them and common interests you might have.
  • Founders can be very open with other founders. Do what you have to in order to maintain that trust. Use the meeting to do your due diligence on the investor. Ask the founder about the firm on your list and how they were to work with through the ups and downs. Make sure you are clear that this is confidential and DO NOT repeat it to anyone, even in conversation. Don’t be shy about getting into details as long as the founders are comfortable sharing. Don’t pry but don’t hold back on asking the questions you think will help you get an understanding of who the investor is and how they work.

In short, make sure you take the time to do your due diligence on investors. It’s critical to know who you’re potentially partnering with for the duration of your startup.

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Business Entrepreneurship Startups

Time to “Workomo”

For the better part of the last decade, I’ve been a startup investor and community builder. It’s been a lot of fun and I have loved learning from all of the founders I’ve met. I’m hoping to meet even more founders and operators during the next part of my journey, where, I’m taking the plunge back into the world of building and joining Workomo as COO.

Why Workomo?

Workomo is a young startup based out of the San Francisco Bay Area founded by my friend Soumitra Sharma. Soumitra and I have known each other for a few years, having crossed paths in the Indian startup ecosystem and having invested together. Soumitra reached out to me when he was raising his pre-seed round in late 2019. We had a conversation about Workomo and I committed to invest on the spot.

Since then, I’ve been spending a lot of time with the team testing out the product, providing feedback, and talking strategy with Soumitra. I even wrote some code to help them with a problem they were dealing with.

In the context of my professional career, I’ve often said that “what you do matters less than who you do it with”. I feel very lucky to have an opportunity to work with an incredibly sharp team and a founder with a crystal clear vision for Workomo.

I look forward to sharing more details about what we are building at Workomo and what we have in store over the next few months.

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Early-Stage Startup Deal Terms in India 2020

There was a recent thread on Twitter about how even in 2020 angels and VCs in India continue to put ridiculously onerous terms into early-stage deals.

I recently invested in an Indian startup that closed a pre-series A round and the documents were more than 100 pages. When I was at 500 Startups, with the help of BMR Legal, we modified the 500 Startups KISS Agreement for India and open sourced the documents in the hopes that it would simplify early-stage documentation and reduce the amount of time to close a deal and the cost of doing early-stage deals in India, much like Series Seed docs and the SAFE have done in the US.

Here’s a presentation I gave in January 2020 at CIE-IIIT Hyderabad on some of the deal terms in India to watch out for. Unfortunately, there’s no video of the actual presentation I gave so I recorded a voice over for you.

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If there are additional terms you have questions about or terms you’ve come across that are onerous, please leave a comment on the YouTube video and I will respond. Hopefully, other founders will benefit from it as well.

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Startups

Cold Emailing Venture Capitalists and Angel Investors

Although most people recommend getting an introduction to a VC or an angel investor, it is sometimes necessary to send a cold email. Here are some thoughts on how one could frame those emails.

This is what I think the basic structure of the email should be:

  • Why you are reaching out
  • How your startup is of interest to the individual.
  • A little of your background, establishing some credibility.

Example 1

A great example of an email from a founder to an investor is:

Hi Pankaj,

I am physician entrepreneur and I run a health tech startup, <STARTUP NAME>, focused on the digital health space with a focus on diabetes. I sold my previous startup in 2015 and started this company in 2016.

I believe you will find our startup interesting because it has measurable traction, we’re going after a massive market and we’re a team that’s been working together for more than a decade.

We are in the process of raising a series A round and are looking for strategic angels that can help with international growth, business strategy, and ecosystem building. Attached is a teaser deck for your review. I would be delighted to setup some time with you to go through the business in greater detail.

In this example, the founder starts with a quick introduction and continues by adding a little about his credibility, being a physician, and selling his previous startup.

He then explains why this deal might be of interest to me. He might have done a little research or watched previous episodes of Invest Stream to know that I want to see traction in the companies I invest in, as well as, a large market size. He also knows that I care about the team and how well they work together.

He closes with why they would like me to consider investing and attaches a PDF. There’s been some debates on Twitter about the use of PDFs vs. using services like DocSend. I prefer PDFs so I can scribble notes on them and save them for posterity 🙂

Example 2

Hi Pankaj,

My name is Dr. <FOUNDER’S NAME>, co-founder of <STARTUP NAME>, an intelligent telehealth platform.

<STARTUP NAME> is an AI telehealth platform helping doctors to complete clinical documentation accurately and efficiently instead of manual, sloppy, unreadable notes. With <STARTUP NAME> providers have increased productivity and the amount of time they can spend with patients by almost 60 hours a year and are, thus, increasing their revenue by more than 100k annually.

Knowing your investment in <PREVIOUS INVESTMENT>, I think you might be interested in knowing more about <STARTUP NAME>, and what we do with AI to help physicians to be more efficient with their time.

Some of our numbers:

  • 50% MoM
  • +5K consultations
  • +50 physicians subscribed to our platform
  • +10 medical specialties

We are raising our Seed Round, and we would really like to show you more of what we are doing and get your feedback.

Let me know if I can send you my deck, or we can jump on a call next week.

I hope to hear back from you soon,

In this example, the founder introduces himself (also adding credibility that he’s a physician) and gives me quick intro to the company and the problem that it’s solving.

He also shares some of their traction information and shows that he’s researched me before dropping me a cold email (referencing a company I’ve invested in previously).

He then shares what stage they are at and why he would like to talk. I would have preferred if he sent me the deck or a teaser deck but it’s not the end of the world. 

What other examples do you have of a cold email you’ve sent out that’s worked well for you?

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Angel Investing at Scale with Fabrice Grinda

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Fabrice Grinda is the founder of Zingy, Aucland OLX and FJ Labs, a VC firm and venture studio based in NYC, focusing on marketplace businesses. FJ Labs has invested in hundreds of companies such as Alibaba, Bla Bla Car, Zolostays, Brightroll, ZoomCar and many many more. In 2018, Forbes named Fabrice the #1 Angel investor in the world. On this episode of Invest Stream, Fabrice shares his journey as an entrepreneur and how that led him to invest in startups in France and Europe, his thoughts on the cryptocurrency vertical, what approach he took to working with the entrepreneurs that he invested in and much much more.

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