VC Question: Why are you raising now?
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What they mean
Investors love it when you don’t need to raise it all. They want to give you money when you don’t want it, of course, you want the money when you need it. It’s high school all over again. If all the girls want to date you, guess who is popular.
In asking this question they’re firstly dealing with the crocodile brain- the first emotion is fear. They are trying to figure out if there are any skeletons in the closet or not? Are you about to run out of money? Do they need to run far, far away!
Once they get over fear there is the greed question. Perhaps you are about to reach the point of inflexion and you’re raising money for you to be able to capitalise on that? This is a compelling reason for investors to invest. Bonus points if you undervalue yourself!
You may also want to add that the timing is perfect in the market for you to raise. The timing question is incredibly important! Bill Gross at Idealab and found the key factor in why some companies were big hits and others failed was… timing! The timing is always now or to position you to be at the right place at the right time in a year or two. As Wayne Gretzky said you want to skate to where the puck will be, not where it is.
However you answer it, you are raising now because of a great opportunity and the timing is perfect, never that you need money!
What you need to say
“Artificial intelligence has finally come out of a cold winter. It’s currently the top of the agenda of the executives at every single company. Through the relentless commentary of the media and even the White House putting out a position paper, the market is finally educated. We think this is the perfect time to aggressively penetrate the market.
We have spent the past two years developing our product to be one of the real leaders in the industry, and frankly, it’s beautiful, but that’s just my opinion! We want to share our amazing product with customers and that costs money.
We have been funding the company out of our own resources and due to the sales cycle, for us to more aggressively and land grab customers we need to spend money on marketing.
To put this into perspective, customer feedback has been incredible and we get most of our customers through word of mouth recommendations. They have all run out of options to radically decrease their cost base. Automation is the only answer. Our hard work is going to pay off.
We know that you had a fantastic experience working with Google Brain previously before joining A16Z and so we want to come and talk to you first, to see if you would partner with us on this journey!”
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