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What they mean
Depending on how you answer this question, it can imply that you have been trying to fundraise for some time, are not discriminate in whom you are trying to raise money from, or provide insight into who the potential competition is. The best thing for you to do is to provide as little information specifically as possible, whilst still intimating that there is FOMO to be had.
More often than not this is an expression of interest. The investor is wondering if you are into the process and they need to move fast. All VCs are sheep so they will be more interested if they think other investors know something they don’t and so you are hot property. They are especially interested if big name VCs are chasing you.
Never mention the specific investors that you’re talking to. Investors know other investors far better than you do. They can easily call them up and check everything that you said as well as even potentially collude. There just isn’t any upside for you as the founder to name names. The best thing to do is say we are talking to firms of a calibre similar to yours, as well as the principal sides of telco companies etc if say you are servicing telcos and they could be corporate investors.
What you need to say
“We have only been fundraising for one week, however, we have already got quite a lot of interest from three of the big VCs who do SaaS and have first metings with them. You can probably guess who they are.
Since we are profitable, we are under no pressure to raise right now so we can afford to be picky. Our ideal investor has a large fund size and experience and focus in SaaS, so those are the people who we are talking to. I love your background, so I’m sure you would be a valuable lead.”
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