[lpolovets]

As an investor, I agree with you and disagree with the article. I dig in with factual questions because I'm excited, not because I'm not. If I'm not interested, that's when I pass instead of asking questions.

FWIW the real truth is somewhere in the middle: some investors invest based on their gut, and if they are asking factual questions then that means they are not emotionally interested enough. Other investors invest based on their brain, and if they are not asking factual questions then that means they are not intellectually interested enough. (Or your presentation answered all of their questions, which is very rare.) Interpreting the actions of both investors in the same way is a mistake.

[keithwhor]

Hey Leo,

There's probably no objective truth, but let me offer a perspective: a founder sees 1 founder (themselves) and 100 VCs and a VC sees 100 founders and 1 VC. In the same way you look for patterns in founders, teams, products and markets to determine who to invest in, founders look for patterns in VCs to see who's likely to invest. A useful and common pattern founders pick up on is VC tire kicking: the ones who are interested enough to dig in but not excited enough to invest immediately. Asking questions in a meeting is one thing, but following up in an e-mail with an itemized list of; "how do you think about [x], what about [y] competitor, have you thought about [z]" is a surefire indicator that an investor's not willing to move right now (not enough confidence in founder, team, product or market) and, as a founder, you need to move on.

So you may sit here and proclaim, "hey, this advice isn't accurate, because I ask questions when I'm interested!" Well... yeah, sure. There's (1) selection bias involved, you're a well-known VC and you're likely meeting with, on average, more experienced founders (by the time a first-time founder gets to you they may have been through an accelerator, faced tens of rejections or more, etc.) and this can lead to more mature relationship building, and (2) for every 1 in 100 founders you invest in this way, you passed on the other 99, making you one of their 99 they need to pattern match and learn from.

Viewed through this lens, founders should absolutely take this advice to heart. If you, as an investor, really wanted to invest in a founder and they snubbed you a bit after a follow up question (not rudely, they just have to choose where to focus), would you suddenly lose interest, or would you pursue a great deal / great opportunity? I have a hard time believing you'd let somebody you thought was the next Zuck walk out of the room without a term sheet. Founders should try to find the investor who thinks they're the next "Zuck", or some reasonable facsimile of such given the product and market.

Hope that helps clarify. I've seen friends put through the ringer by getting too caught up in the weeds with VCs that clearly weren't interested, or were tire-kicking. Can happen to amazing founders and it's wildly distracting.

[lpolovets]

First, thanks for the thoughtful reply. Second, I agree that sometimes VCs aren't that interested but still waste a founder's time. That really sucks. I also agree with you that I have much more data on founder behavior vs. investor behavior because I rarely work with other investors directly. Inversely, founders often have a better view of investor behavior.

Where my opinions differ:

> Asking questions in a meeting is one thing, but following up in an e-mail with an itemized list of; "how do you think about [x], what about [y] competitor, have you thought about [z]" is a surefire indicator that an investor's not willing to move right now

That's not true in my case, and also not true for many funds I sometimes share notes with (w/the founder's permission). I often see Q&A email exchanges that either the founder or an investor in a startup forwards to me. So I can see firsthand that other investors are asking email questions (and then making investments), too.

Furthermore, how much follow-up there is depends on check size. If someone is investing $15k or $50k as an angel, they might make a decision after a single meeting because that meeting is often their sole shot to meaningfully interact with a founder. But if a fund is writing a $400k or $1m check, more diligence will be required. My fund can't write a $1m check just because I really hit it off with someone. That would be extremely irresponsible financially. Similarly, a founder shouldn't take a $1m check from me (or any other investor) without doing some of their own due diligence.

> For every 1 in 100 founders you invest in this way, you passed on the other 99

Yes, but if most investors (esp. funds) want to do more diligence, and you have to go through more diligence to be the 1 in a 100, then avoiding investors who want to do more diligence means you might not end up anyone's 1 in a 100. A crude dating analogy: a typical person might need to go on a date with 100 people to find their life partner. But if you set a filter like "if you want a second date before deciding whether we should get married then you obviously don't like me that much," then you might end up filtering out most or all of your suitable partners.

> If you, as an investor, really wanted to invest in a founder and they snubbed you a bit after a follow up question (not rudely, they just have to choose where to focus), would you suddenly lose interest, or would you pursue a great deal / great opportunity?

It depends. If I already want to invest, then being snubbed would give me pause, but I would probably continue trying to make the investment work. If I wasn't sure I wanted to invest, then being snubbed would make it much less likely that I'd try to invest. Whether you're a founder or an investor, how someone treats you during the diligence/courtship process is a decent indicator of what working with them will be like after the investment. Working together might be worse than the preview, but in my experience it's very unlikely to be better.

> I have a hard time believing you'd let somebody you thought was the next Zuck walk out of the room without a term sheet.

FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner.

> I've seen friends put through the ringer by getting too caught up in the weeds with VCs that clearly weren't interested, or were tire-kicking. Can happen to amazing founders and it's wildly distracting.

100% agree here. This behavior really upsets me.

[keithwhor]

> FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner.

Sure: but let's dig in. I'm interested. Out of those 65 investments, how many did you explicitly lead? Sure: the majority took 2-4 meetings. But...

(1) What's a meeting to you? Keep in mind that your Principals and / or Associates conducting meetings and diligence should not qualify as meetings. If it's not with a GP it's not really a fundraising meeting and no founder should reasonably consider it such. Yes, I'm adding a semantic layer here, but this semantic layer is extremely important to founder psychology and how we classify meetings, fundraising success and more.

(2) How many of these investments had a term sheet after only one meeting? Not necessarily with the founder in the room, but this is, for all intents and purposes, functionally equivalent to an investment offer made in the room?

On top of that, is the a correlation between leading an investment round and a fewer number of meetings with a founding team before investing? My intuition based on my own experience and anecdotes of other founders would be that there should be a correlation - happy to be wrong, though.

Also, out of the investments that took "2-4 meetings", did the founders ever roadblock you from investing (i.e. it's a meeting but the founder "isn't fundraising"?) - because this is pretty common (some use it as a tactic but often it's just flat out true), in which case "2-4 meetings" isn't actually "2-4 fundraising meetings." If a founder is at this stage, they don't need this Medium Article's advice: they've already developed the maturity to execute upon a fundraising strategy, you just might not see it due to selection and / or survivorship bias (seems natural, and just how things are done). In fact, they're executing the latter part of the strategy outlined here (have found a lead via "focus", or relatively confident in their ability to receive a term sheet when they pull the fundraising trigger).

We're really pulling apart the fabric at the seams here: there's a reason this article isn't a hundred pages or more, which is realistically the volume of information a founder has to internalize while they're developing their own understanding of the fundraising and investment landscape. They'll also find their experience to be very personal. This advice is meant as a launchpad, and I think it's a good starting point for novice founders.

If I were to give advice to new founders (and I do get asked occasionally, but I'm literally nowhere close to a celebrity fundraiser and still a fledgling entrepreneur) it's, "I still don't understand fundraising. Just be yourself and build something you're passionate about, have confidence, be persistent, be kind, and the right people will come along. You'll probably trick yourself into thinking you understand something about the process, but realistically, fundraising is just about people and relationships, and shit is messy. Be humble and thankful, and try not to waste too much time discussing fundraising strategy with investors on Hacker News."

Disclaimer: I often don't follow my own advice.

[confiscate]

For what it's worth I think both of you have valid points.

The only point I want to add:

- the article explicitly mentions it is advice for EARLY STAGE startups (see "No one knows the value of an early stage startup")

Yes, if the startup is already Series D, the traction numbers are there, I'd see why you would want to ask lots of quantitative questions to get a yes/no decision.

But for an EARLY STAGE startup--would digging in with factual questions really change your decision? At that point everything is just projections and guesswork. The signals are more qualitative than quantitative.

Put another way--as an investor, when was the last time you met an Early Stage startup, came out of the meeting with a "default not invest", emailed them a follow up FACTual question, and the FACTual answer they replied back to you, turned you from a "default no" into a "yes"?

[lpolovets]

Asking factual questions isn't just for learning facts, it's also for seeing how someone things.

Example: "During the call you mentioned the market potential for a CRM for plumbers is $3b. When I did some napkin math I came up with $400m. Can I ask how you arrived at the $3b number?"

Bad answers: "Gartner says the market is $3b" or "CRMs are a $100b market overall, and plumbers are 3% of the workforce."

These are factual answers, but pretty weak.

Good answer: "There are 3.3m plumbers in the workforce. 30% of them are solo entrepreneurs, so they are unlikely to need a CRM. The other 2.3m spend 14 hours per month on managing their contact lists [citation]. We surveyed 30 plumbers and saw a willingness to pay $100/mo if we can reduce the 14 hours down to 2 hours. $100/mo x 12mo x 2.3m plumbers = $2.8b."

This is also a factual answer, but you can tell the founder thought about this more, they did customer development to get good data, etc. As an investor, an answer like this gives me a lot more confidence.

[keithwhor]

I think I'm getting rate-limited by HN so this may be my last response, buuuut:

I think that, unless this was a real example with founders you can name, this is a dangerous example, and even then it's suspect. I have literally not once swayed a "maybe" investor via an email. It's "maybe" and not "yes" for a reason, and the way you've framed it here is as if "maybe" converts to "yes" with enough elbow grease and a cleverly crafted answer. Founders can spend hours writing single e-mails to investors, especially if they're desperate for funding. So what you read as a simple e-mail response may realistically have been half a day of lost fundraising productivity, for, at best, a 10% chance they convert your gut-feeling "maybe" to a "yes."

This is where founders have an intuition about fundraising, especially first-time founders raising early rounds, that investors often just have no way to empathize with because they simply don't know.

I have, however, swayed "maybe" and even outright "no" / "not now" investors by walking away, mentally divesting, and re-engaging particularly helpful ones later with additional proof points. YMMV as a founder but I would recommend this approach 100 times before I ever recommended sinking hours into a clarifying e-mail with an investor who was a "maybe."

Your response may be, "well, just don't spend hours on e-mails then." Sure, tell that to the founder who has literally sunk $20,000 off of their 20% interest credit card and another $20,000 of their lower-middle-class parents' retirement money into their startup. They'll nod and spend the hours anyway. (The cruel irony is that many of the founders insecure enough to spend hours on an e-mail are almost guaranteed to not sway you, meaning that the 10% that do sway you only represent something like 1% of the total time spent on e-mails. This is why this sort of advice exists.)

[confiscate]

Better example. Imagine, as an investor:

- an Early Stage, pre-traction startup gave a pitch to you at a meeting

- you came out feeling "default not invest" (i.e. if nothing new happens you won't invest)

- you later emailed them a Factual question

- they replied with an elaborate Graph/Pie/Chart with lots of numbers to clarify some detail, that the founders decided were not important enough to be in the original pitch

- that Graph/Pie/Chart turned you from "no" to "yes"

when was the last time that happend?

[lpolovets]

Good question. Speaking just for me: if I leave feeling "default not invest" then I will just write a pass email. If I leave feeling interested but wanting to know more, that's when I will ask more questions. If it's 2-5 questions, it'll probably be over email. If it's >5, I'll probably suggest a quick call instead.

Factual answers have sometimes swayed me in a positive direction when I'm skeptical about some number or claim and the founder's answer is strong and changes my mind. They've also swayed me in a negative direction when I'm skeptical or confused about something and a so-so answer takes me from a "maybe" to a "no".

[confiscate]

Interesting, thanks for the clarification

[keithwhor]

Great example. Thank you.

[lpolovets]

> Sure: but let's dig in. I'm interested. Out of those 65 investments, how many did you explicitly lead?

Our first fund wrote $200k-$300k checks and made 40+ investments. Those checks were small parts of seed rounds, and we only led about 10% of the time.

The current fund writes ~$750k checks and has done 20+ investments, and we've led (or co-led) about 50% of the time.

> (1) What's a meeting to you? Keep in mind that your Principals and / or Associates conducting meetings and diligence should not qualify as meetings.

They count for my fund :). Generally we do 2 smaller meetings (maybe associate the first time and partner the second time, maybe partner the first time and partner+associate the second time, etc), then a full partnership meeting.

The rough theme of these meetings are Get to know each other (1st meeting), Dig in more deeply (2nd meeting), and Crowdsourced Q&A (3rd meeting).

> If it's not with a GP it's not really a fundraising meeting and no founder should reasonably consider it such.

It's part of our process. If you don't do well with the first meeting -- regardless of whether it's with a partner, associate, or both -- the process ends. If you do well, again regardless of whom it's with, we'll ask to do a 2nd meeting where we can go deeper.

> How many of these investments had a term sheet after only one meeting?

Of the term sheets we've offered, all took at least a couple of meetings. When we participate on someone else's term sheet, we committed once during the first meeting, and I don't think we've ever committed after the first meeting but w/o a second meeting.

> On top of that, is the a correlation between leading an investment round and a fewer number of meetings with a founding team before investing?

Not for us. If anything, the correlation for us is that we tend to do more diligence/meetings when we lead. When we lead, we know other investors will ask us to share diligence, and the founder will send some investors to us so that we can tell them why we're excited, so we want to have even more conviction than usual. We can get that extra conviction through a little more diligence.

> Also, out of the investments that took "2-4 meetings", did the founders ever roadblock you from investing (i.e. it's a meeting but the founder "isn't fundraising"?)

We don't do a great job of outbound tbh, so usually we meet founders because they are already fundraising or about to start. If someone says they're not fundraising, we've rarely preempted, but for companies we really like, we will continue to communicate regularly with the founders until they decide they want to raise. (And we realize they might decide they don't want to raise at all).

> If I were to give advice to new founders (and I do get asked occasionally, but I'm literally nowhere close to a celebrity fundraiser and still a fledgling entrepreneur) it's, "I still don't understand fundraising. Just be yourself and build something you're passionate about, have confidence, be persistent, be kind, and the right people will come along. You'll probably trick yourself into thinking you understand something about the process, but realistically, fundraising is just about people and relationships, and shit is messy. Be humble and thankful, and try not to waste too much time discussing fundraising strategy with investors on Hacker News."

I think this is great advice :)

(FWIW all of these answers are on behalf of my fund, and other funds might be different. But I generally don't see established seed funds committing after a single meeting.)

[keithwhor]

> It's part of our process. If you don't do well with the first meeting -- regardless of whether it's with a partner, associate, or both -- the process ends. If you do well, again regardless of whom it's with, we'll ask to do a 2nd meeting where we can go deeper.

Great post, going to nitpick here: it doesn't matter what you consider a meeting, it matters what the founder considers it. A meeting with an Associate is not a meeting. It's a "get to know you" - it's not a real meeting until a GP is involved. That's the only time when there's money on the table. And if there's money on the table and there's not a "default invest", that's when you (as a founder) should mentally divest from the relationship. This is, as I understand, literally stock advice from most accelerators and experienced Angels / founders. In fact, I think the general advice is, "do not take meetings from Associates at all if you can avoid it. Get to a GP as fast as is humanly possible."

[lpolovets]

But isn't a 1st meeting with a GP not a real meeting as well in that case? Because if money is not on the table at meeting #1 (whether with a GP or associate), then it's not a real meeting. And that means the only real meeting is the 3rd meeting (partner meeting)... but you can't get there without the first two "encounters" :).

[ScottBurson]

> We don't do a great job of outbound tbh

I can only speak personally, of course, but all the time you spend here on HN, and the helpfulness of your posts, have definitely established you as someone I will want to talk to when the time comes.

[lpolovets]

Thanks, Scott! I appreciate that and look forward to hearing from you someday :)