Summer 2023 has been the hottest one on record since 1880, but while early-stage founders were sweating over the order of the slides in their pitch decks, the investors they hoped to connect with were playing pickleball in Jackson Hole or relaxing poolside with cocktails in Palm Springs.
August is one of the slowest months in venture capital, which is why now is such a good time for fundraising founders to ramp up their outreach efforts.
“People tend to be out of the office longer than usual this time of year,” says Kittu Kolluri, founder and managing director of Neotribe Ventures. “I suggest reaching out right before Labor Day to set up a meeting in September or wait and start your outreach altogether next month.”
August is one of the slowest months in venture capital, which is why now is such a good time for fundraising founders to ramp up their outreach.
With that in mind, here’s the latest edition of “How to Pitch Me,” a recurring column that gathers tips, insights and strategies from early-stage investors who are interested in making deals.
There’s a lot of actionable advice in here: If you’re wondering how much previous experience with AI investors are looking for, which questions to ask once you’re in the room, or just need a level set on CEO salaries, please read.
Thanks very much to everyone who participated:
- Christine Hsieh, venture partner, Third Culture Capital
- Marta Cruz, co-founder and managing partner, NXTP Ventures
- Adam Struck, founder and managing partner, Struck Capital
- Adam Nash, angel investor, CEO and co-founder, Daffy
- Anshu Agarwal, general partner, Converge
- Kittu Kolluri, founder and managing director, Neotribe Ventures
- Jennifer Lee, partner, Edison Partners
- Dave Zilberman, general partner, Norwest Venture Partners
- Jake Jolis, partner, Matrix Ventures
- Chad Cardenas, founder and CEO, the Syndicate Group (TSG)
- Matthew Kinsella, managing director, Maverick Ventures
- Ty Findley, co-founder and general partner, Ironspring Ventures
- Kathleen Kaulins, principal, Plymouth Growth
- Samarth Shekhar, EMEA regional manager, SixThirty Ventures
- Zamir Shukho, founder and general partner, Vibranium Venture Capital
Christine Hsieh, venture partner, Third Culture Capital
What kinds of investment opportunities are you looking for right now?
We are looking for teams of uniquely qualified founders who, through their diverse experiences, cultures, identities, and training have a distinct advantage in building world-changing healthcare companies. Our sector and stage focus include digital health and techbio companies who are at seed or pre-seed stage.
How do you prefer to be approached: a cold email, a warm intro, or another method?
As an effort to break down barriers that have historically excluded far too many entrepreneurs from venture investment, we encourage entrepreneurs to reach out to us via our online submission form, without requiring a warm introduction.
We seem to be in a generative AI hype cycle: Where’s the bar set in terms of expertise/experience with AI, and how much domain expertise do you need on the team?
In healthcare, you need domain expertise on the team no matter how strong you are at AI. The complexities of the stakeholders, processes, and regulations involved are too high for “normal tech disruption” to work as you might see in sectors that aren’t as conservative.
For care-delivery startups, we like to see clinicians either as part of the founding team or with a committed role as an advisor.
In August 2023, what are some of the top questions founders need to ask investors?
- How can you help me with our gaps and growth goals?
- What are your expectations on timeline to profitability?
- What’s your position on follow-on funding?
What’s a traditional pitch tactic that no longer works but is still a common practice?
Less a pitch tactic, perhaps a business strategy: asking for too much money with little to no traction. The bar is higher now.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
We are open to reviewing any supporting documents as long as they tell your story and the business’ potential well.
Tell us about the best pitch you’ve received recently: At what point did you realize you were going to invest?
A recent great pitch we saw came from a founder who was very obviously deeply knowledgeable about the problem they were solving, and the thinking behind a few different strategies they’d possibly take along with their trade-offs.
We realized we wanted to invest when we saw the perfect combination of a founder we were highly confident in, building in a white space with lots of room to grow, and with solid paths to market that they could pivot between if needed.
What are you reading/watching/listening to right now?
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Marta Cruz, co-founder and managing partner, NXTP Ventures
What kinds of investment opportunities are you looking for right now?
We exclusively invest in B2B companies in Latin America. We predominantly invest in B2B companies in pre-seed stage and seed-stage companies, usually becoming the first institutional check into the business. We also invest at the Series A stage, although a little less frequently. Our typical check size for seed rounds ranges from $500,000 to $3 million USD and we like to lead or co-lead rounds.
As a sector-specific and thesis-driven fund, we concentrate on cloud and SaaS, e-commerce enablers, fintech, B2B marketplaces, and AI and data-driven businesses.
How do you prefer to be approached: a cold email, a warm intro, or another method?
While we are open to cold emails, warm introductions through our network generally stand out more. It demonstrates that the founder has done their homework and has already begun networking in the industry.
If you’re comfortable doing so, please share your contact info.
You can get in touch with me on Twitter @marta_cruz and for more formal interactions, our website provides a point of contact.
We seem to be in a generative AI hype cycle: Where’s the bar set in terms of expertise/experience with AI, and how much domain expertise do you need on the team?
For nontechnical founders or those not primarily in the AI space, we emphasize deep domain expertise and the ability to attract and manage a solid technical team, where the ideal combined experience could include machine learning experts, data scientists, software engineers, ethics, and policy specialists.
We must keep in mind that AI is a collaborative effort and that diversity of knowledge often leads to more successful and innovative results. Therefore, a competent AI team must demonstrate leadership skills, a comprehensive understanding of customer needs, and a clear vision, just like in all teams of entrepreneurs, regardless of the technology they use.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
We are open to reviewing both pitch memos and completed decks. The key is to clearly and succinctly communicate the business’s value proposition, market opportunity, roadmap for growth, and, of course, the founder team information and what the startup is looking for.
What are you reading/watching/listening to right now?
Two books at the same time:
Adam Struck, founder and managing partner, Struck Capital
What kinds of investment opportunities are you looking for in August 2023?
We have spent a significant amount of time this year understanding where startups can capture the most value and have come up with a few areas where we are excited to invest, most notably in verticalized applications of generative AI and in middleware (tooling and infrastructure) that supports the development of new AI applications.
These two investment theses work in concert with one another, as any company that ingests proprietary data from its verticalized application will need tooling to orchestrate and optimize this data so it can continue to create specialized workflows for its end users. We are looking forward to seeing this new trend continue to evolve.
How do you prefer to be approached: a cold email, a warm intro, or another method?
We want to speak to the best and brightest founders, regardless of whether the introduction came from someone within our network or from cold outreach. With that being said, a warm introduction can help us cut through some of the noise, as we receive dozens of pitches each day.
If you’re comfortable doing so, please share your contact info.
We seem to be in a generative AI hype cycle: Where’s the bar set in terms of expertise/experience with AI, and how much domain expertise do you need on the team?
While a founder with deep domain expertise through decades of working in AI and ML is certainly compelling, we don’t want to exclude ourselves from working with founders earlier in their professional journey.
With the latter founder archetype, we would look to understand their genuine interest and depth of understanding of the technical advancements in the space.
Generally speaking, how much salary should the founder of a pre-revenue startup in a Tier 1 city pay themselves?
We typically categorize companies by funding raised, rather than by whether they are generating revenue or not, as some businesses are inherently more capital intensive than others. For the SaaS businesses that we primarily invest in, this means they will have likely raised under $2 million. We like being as data-driven as possible and will use Pave to benchmark salary recommendations.
In August 2023, what are some of the top questions founders need to ask investors?
You are increasingly starting to see more startups not able to reach their next set of milestones as quickly as they hoped, and consequently not able to raise a next round of financing. It’s important for founders to understand how VCs have handled these interactions previously.
It’s easy for a VC to be highly supportive and go the extra mile for their fastest-growing companies in their portfolio; however, what’s more indicative of their future behavior is how they support companies experiencing more hardship. Look to speak with a founder in their portfolio who “failed,” or ask if the VC has a strategy around continued financial support in between funding rounds.
What’s a traditional pitch tactic that no longer works but is still a common practice?
We still encounter pitches that revolve around founders preferring to present their entire pitch deck and take questions at the end. We much prefer an engaging back-and-forth discussion around specific questions we are interested in learning more about.
A discussion results in much deeper insights from a founder, which can be extremely helpful in deciding if we want to dig into further diligence. For founders, a discussion-based approach can be more beneficial too, as it lets them understand exactly what investors want to learn more about in a more thoughtful manner. These insights can be helpful as the founder goes through their fundraising process, as they can tailor their pitches to inoculate against specific risks.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
Typically, we prefer a completed deck, as this lets us be as prepared as possible for an introductory conversation with a founding team.
Tell us about the best pitch you’ve received recently: At what point in their presentation did you realize you were going to invest?
We prefer to run diligence processes that stretch across a multitude of conversations, with each discussion compounding upon one another, as we and the founding team become increasingly excited about partnering.
It’s difficult to pinpoint an exact moment, but we had the privilege of hosting the founding team of our most recent investment at our office in Santa Monica. The team really impressed us with their large vision and execution to date as well as the mission-driven ethos of their product. We are always excited to back revolutionary founders building for the right reasons.
What are you reading/watching/listening to?
I’m currently reading “Four Thousand Weeks: Time Management for Mortals” by Oliver Burkeman and finished watching “The Diplomat” [on Netflix]. I recommend both!
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Adam Nash, angel investor, CEO and co-founder, Daffy
Are you open to reviewing pitch memos, or do you prefer a completed deck?
I have made investments in founders who used both of these approaches, although I find that there is no good substitute for a founder walking me through the narrative of their company backed by a completed deck. For the initial request for a meeting, however, I’m very happy to receive either a well-written memo or a deck.
In August 2023, what are some of the top questions founders need to ask investors?
Founders are well advised to be cautious when including angel investors who are new to investing. Most seasoned angel investors know what their model is and realize that most companies do not return capital. It can be incredibly distracting and difficult to deal with small investors who have unrealistic demands on a startup, especially when the company hits the inevitable challenges with product, distribution, and financing.
For institutional investors, it is critical to understand what the model for the firm (and the fund) is, as well as how those investors behave as board members and partners in building the business. Investors come with many different backgrounds, styles, and areas of expertise.
Raising capital at early stages is a hiring decision, not a financing decision. Trust is critical. A bad investor is difficult to deal with, but a bad institutional investor can kill the company.
What kind of investment opportunities are you looking for in August 2023?
In fintech, I’m looking for three things:
- Product-founder fit: I need to believe that the founders have a genuine passion for the problem they are solving, not just a path to make profits. Most of the worst stories in financial services come from ambitious founders chasing profits instead of focusing on their customers.
- Real value: I need to see financial products that will generate economic value, both individually and at scale. Too many fintech ideas continue to lack academic and intellectual rigor, and those chickens come home to roost.
- Distribution strategy: I need to understand what customer segment this product is designed for and how to reach them in sufficient numbers to build a venture-scale business.
How do you prefer to be approached by a founder with their initial pitch: a cold email, a warm intro or another method?