Building a relationship with VC and speaking to VC when you’re not fundraising isn’t a good use of your time. Here is why:
You have better things to do. We love founders that are so busy building the business, they’d prefer to stay heads down and grind as opposed to talking to us outside of a fundraising process. You’re running a company, you have a million things to do, your inbox is full, and your hair is on fire. Why interrupt any of that just to have a high level conversation with me?
We’ll be ready. If you’ve built a solid business with great numbers, we’ll be ready to drop everything to evaluate an investment in you, as will every other venture fund out there. It’s a sellers’ market as there are way too many venture dollars chasing too few good deals, so you won’t need a pre-existing relationship to run a competitive fundraising process. The performance of the business and not pre-existing relationships are what will ultimately drive investor interest.
We’re talking to your competitor. VC that love building relationships aren’t just talking to you, they’re talking to your competitors as well. It’s a natural part of the marketing process. While you were disclosing everything about your company relationship building conversation, the VC was comparing what you said to his notes from calls with your competitor. If he ultimately invests in your competitor, the notes from your calls with him will come in handy.
You’re not going to learn anything. Relationship building calls tend to be very unproductive and superfluous. Eventually all these conversations will sound the same. VC will say: they can add a bunch of value, they have dry powder, they’re founder friendly, blah blah blah. You really won’t learn anything about that VC because he’s not having to do anything for you, he’s just talking. When you’re really going to learn about a VC is during the fundraising process itself; you’ll see how they think, what they care about, and frankly how smart they are or aren’t. Additionally, you’re going to do reference calls as part of your diligence on the VC, and that’s where you’ll get real information. Be sure and ask for calls with successful and unsuccessful companies in the VC’s portfolio.
Term sheet trumps the relationship. You can have a wonderful relationship with a VC and be best of friends, but when it’s time to fundraise, your friendship is going to be the least important criteria in evaluating a partner. What will matter are the terms of the term sheet such as valuation, board seats, liquidation preferences as well as speed to close and process. If you have a great relationship with someone but their valuation isn’t competitive or terms aren’t amenable, you’ll be doing yourself and current investors a big disservice if you go with them. You may even be violating your duty as a fiduciary.
So, don’t worry about building relationships with VC. You’re busy, the performance of the business is going to be what ultimately drives interest, and worst case, you disclose a ton of information about yourself and then that VC goes and invests in a competitor. Stay heads down and reach out to us when you’re ready to raise (email@example.com). We’ll be here.
Visit us at blossomstreetventures.com and email us directly with Series A or B opportunities at firstname.lastname@example.org. You can also connect with me on LI. We invest $1mm to $1.5mm in growth rounds, inside rounds, and other ‘special situations’ all over the US & Canada.