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AA 003: How can I prepare for a meeting with a potential pre-seed investor?

Welcome to the third podcast of the Ask Alex show! Today the question is “How can I prepare for a meeting with a potential pre-seed investor?”

The key is preparation and practice!

In this podcast, we cover my top 8 tips to rock your first pitch and never be caught off guard.

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Transcript if you prefer to read

Hey guys! Welcome to episode 3 of the AskAlex podcast. Where we answer all your questions that you have regarding startups investments. Now today we have a question from Corrie in the US, Corrie asks “How can I prepare for a meeting with potential pre-seed investor?” Thanks Corrie. Now, raising money, it’s hard, it’s laborious and it can be pretty scary. So making sure that you do the right things is certainly very wise question and I’m glad that you’ve asked it.

So I’m going to run through with you on about 8-9 points of what I think are the most valuable things that you should be doing and can be doing. So let’s start off with the first one; you need to have a pretty website. I know that seems super lame but what do you think the first thing people do whenever they hear about your startup? They check your website, right? Surely they may have your deck but the go to place is the website and if you see something really crappy you can be sure that they are going to really question your credibility. So get a pretty nice site up and make sure it looks great.

So the next thing you want to do, number two is check your online presence because after website they want to see LinkedIn you know who are you, where have you worked, do you have shared connections which establishes some social proof.

So if you got no shared connections, you’re a 3rd degree connection which is hmm is this guy plugged in the industry? Or do you have 250 shared connections which is obviously great and it’s a lot of people that you can check up on with them.

Look at other places; do you have an angel list profile? Obviously if you’re raising an angel list you’re thinking about this already but that’s another place for people may check up on you. So make sure everyone on your team has the profile up to scratch and correct. Next, know everything about your industry, if you don’t already why fundraising? Know everything that’s going on, all the trends, all the right buzzwords terminology.

It’s pretty embarrassing to make out that you are a tech expert but if you say the wrong things you gonna get get called out on BS pretty fast. Right? So know everything that’s going on. If you are doing an AI company which is super hot right now and you are pitching and an investor actually knows about it, when she knows about it, it can be really great icebreaker to build rapport, to discuss everything that’s happening in AI.

So really understand a topic and be able to talk about it passionately cause this is what you’re meant to be doing. Investors love passionate, they love for you to be the expert. So share that passion with them.

Next, you need to know all your business metrics and not just know what they are but be able to sell them unless you are going up towards the right in a relatively vertical manner. You’re not going to have all the perfect matrix, right? So I talk about this like tits and ass. If you don’t have tits then you sell the ass. If you got a boney ass then you focus on the top side, right?

So select what it is that you want to accentuate. If you don’t have massive revenue then you can talk about your growth rates, you can talk about your retention, if it’s e-commerce, what is the time to second purchase, think about what your metrics are and how you want to communicate this to people. But that starts with actually knowing what they are and having the right ones in the first place so if someone says “What’s your MRR? What’s your ARR? What’s the GMV? What’s your growth rate? What’s your CAC? What’s your LTV?” You don’t know these things, that’s freaking scary.

The next element of this course is your financial forecasts. So, how much revenue are you making in year 5? These are all the questions you need to have the asnwers to. You’ve probably watch Dragon’s Den and seeing people are totally foolish when they get asked to answer a basic question like what their revenue is and they go

“umm. I know this. It’s a.. umm..” No, that’s not right. I mean you look really stupid, right? So know your metrics, know your numbers.

Next, you want to research the investor, know thy enemy if you will. Who is this person? Are there investing the right stage? Do they have sector expertise? Have they invested in any of your competitors? That’s probably something you should check, right? Look at what deals they’ve done and then use that information to prep some smart questions. Of course you know during the meet they’ll probably asks if you have any questions for us and if they don’t feel free to ask this is meant to be a two-way relationship, right? Make the most of work to get into your company rather than you working just to get their money, be the prize.

So, doing your research will also make you look like a pro. VCs want to feel special they don’t want to feel like what they are, a commodity, money and I know you want it but you have to play the game a little. People love to talk about themselves so you knowing a lot about your investor gives them the opportunity for them to talk more about themselves.

Get an intro to the investor, how you get in the room can often be more important than actually just getting into the room. So you made us think “Alex, whatever that’s the rubbish.. the world’s rubbish advice!” Right? “I know I’m amazing once I get in the room they’re going to give me like the huge check that I want.” Well it doesn’t really work this way, there’s an information asyncrity. So you know you, you know what you’re about but the Investor doesn’t know you from Adam. How do you think is this going to work? You say “Hey, Alex! So I’m doing this e-commerce company, can you give me one and a half million dollars please?”

I think I’d like to have little bit more wining and dining before you know we go to the bedroom. So what is a great way for me to trust you a bit more? Social proof, right? You getting into the room because some top investor or some really well-known founder or maybe some founder in their portfolio said “Hey, Jim Breyer! You should really chat to Mary, she is just awesome! You’re going to love what they’re doing, the metrics are fantastic. Seriously, take a meeting with Mary!” Right?

So when Mary comes in the room I’m like “Okay, this founder that I respect thinks Mary is awesome.” I’m really kind of getting that vibe that maybe you are someone I can trust. But if I don’t know you and you just send me an email “Hey, Alex! Managed to find your email on LinkedIn we’re doing an e-commerce company stuff let’s have a chat.” It’s not the same thing you know. Vcs need to have that trust for you so how you get that meeting with investor really matters? Let’s say you just learned this and you’re thinking “Uh oh. I’ve really messed up.” Well, you can fix that you know see if you can get someone to recommend you or reintroduced you for the second time. All you trying to do is fundamentally build trust with an investor. So understand really how you get in the room really matters.

Practice, practice, practice, practice, practice on your own, right? You really really need to know your pitch. So I can remember when I was pitching a company, an enterprise company, I knew the pitch so well that I would literally be able to do work and pitch investors at the same time. I like I just knew the spiel off by heart just like every single word what I would say and I also knew the variation so if they throw in a question, little curveball there, I already had my spiel to address all that and I can literally get work done at the same time.

You need to have that level of comprehension that you could actually do work whilst pitching. Clearly, if you’re sitting there hearing a question but trying to explain your market size, you have to think about it “Oh, how big is my time? Oh yeah I think they said it..” You were not practiced enough to sit down, write a script, stand out loud and practice. After first couple of times then get a camera and record yourself if you don’t have a camera at least you know record there’s no excuse for not being able to record, right? And listen to what you’re saying does it make sense? Is that what you want to do? Then adjust your pitch as you go along.

Next one now as you know your pitch, you want to pitch someone and get feedback for them. Now, don’t ask your mum, don’t ask someone super nice like a yes man “Oh Alex there was a really good pitch! You know I just thought everything was perfect.” You don’t want that you want to find the grumpiest person you can find who will tear you to pieces, find someone will be even more mean than VC who are generally never mean and get them to give you a really hard time. Because then when you actually go pitch VC’s you’ll have thick skin.

The best people will be an investor if you can, do a trial run get him to give you some perspective on that. Talk to you a founder, CEO of a company whose raised money before, that great. Because they actually know what they’re doing. Next, find your friends or professionals and see what they think. If you’re really are a bit desperate go to Starbucks and say it is something.. some guy’s got a Mac with a bunch of stickers on it “I’ll buy you coffee if you listen to my pitch and give me some feedback. Would that be cool?” There’s always ways of getting feedback from people, just figure it out but do it.

Now, finally; practice questions that VC’s are going to ask you. Because you are gonna get questions. The whole spiel, the pitch is just one thing and bear in mind investors are not going to allow you to just talk for 10 minutes and say “Thank you very much Alex for that presentation. Now I have a couple of questions if you don’t mind.” The best pitches are actually just conversations where the questions are just starting straight away. There are list of questions that VCs are always going to ask. “What is your growth? Tell me about your team. What is the size of the market? What’s the key inside that you’ve seen as to why this is going to be great? Why is the timing now? What’s your unfair advantage? Can you build a competitive mode? Tell me about your financial, your metrics.”

There’s a whole list of questions that people are going to ask and so you can actually prepare for that in advance. In your pitch deck you can also make a supplementary one with whole bunch of appendix slides and so if you know what the obvious questions are or you’ve been pitching and you’ve been asked questions. You can actually make slides answering those specific questions. I mean, how professional does it look if you get asked about a question like your cohorts and you say “Thanks Jim, thanks for asking that. if you don’t mind I’ve prepared a slide for this already I can bring it up and I can show you what a cohorts are.” That’s professional, right? So you can prepare for all these questions. You’re probably thinking “What the questions gonna be? I’ve never fundraised before.” Well, I’ve got you covered.

I spent a weekend and I have 4 e-books that you can download and I’ll put a link to this on the show notes on Alexander jarvis.com/askalex and you’ll be able to see whole bunch of questions. I mean there’s something like 30-40 for all the categories you can think of. You have your exit questions, your financial questions, sales questions. I’ve got you covered and it’s going to cover up probably 95% of all the questions you can ask. I hope that was pretty valuable if you’ve got any more questions feel free to follow up to me if you have a question yourself and you like to be featured on AskAlex then head over to AlexanderJarvis.com/AskAlex and there’s little button at the bottom where you can ask your question. Alright, thanks guys. Thanks so much for spending time with me.

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