Last week at TechCrunch Disrupt (recaps coming soon), I spent less time than usual in the green room where staff and speakers work behind the scenes and walked around Moscone Center.
More than 10,000 people passed through the conference hall over three days: I moderated three investor panels and a Q&A, but I must have spoken with at least 30 early-stage founders. I wanted to learn more about what kind of information they’re looking for.
No one I met said they were looking for “thought leadership” or scorching hot takes: Almost everyone wanted actionable advice that would help them fundraise, build and scale.
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If you’d like to know what investors are looking for, how they want to be approached and what they’re most likely to ask, keep reading.
Six out of the seven VCs I surveyed this month included their contact details, so getting in touch with a tech investor is the easy part. The hard part is crafting a story about your startup that’s so convincing, they’ll recognize the value in your idea and wire you some cash.
I can’t help you there. But if you’d like to know what early-stage investors are looking for, how they prefer to be approached and which questions they’re most likely to ask once you’re in the room, keep reading.
Don’t stop here: If you’re in fundraising mode — or know someone who is — these past How to pitch me columns have the answers (and questions) you didn’t know you were looking for. Thanks very much to everyone who participated this month:
- Maria Buitron, principal, Piva Capital
- Karl Alomar, managing partner, M13
- Raja Ghawi, partner, Era Ventures
- Anamitra Banerji, managing partner, Afore Capital
- Mukaya (Tai) Panich, CIO and CEO, SCB 10X
- David Phelps, founder, chairman and CEO; Merlin Ventures and Merlin Cyber
- Kavita Gupta, founder and general partner, Delta Blockchain Fund
These answers have been edited for space and clarity.
Maria Buitron, principal, Piva Capital
What kinds of opportunities are you looking for right now?
Our strategy really hasn’t changed since we launched our first fund. We are backing the founders and companies that are transforming industry for the improvement of people and the planet. A big part of that is investing in the decarbonization of industry, but at the same time we think about how technological advancements like 3D printing, robotics, and AI are impacting industry.
We look to invest in companies hitting technical and commercial inflection points, and reimagining how trillion-dollar industries, like manufacturing, food and agriculture, energy and heavy industry, will look in the future.
How do you prefer to be approached: a cold email, a warm intro, or another method?
Warm intros are always better because there is also more context. I also like to meet people in person, so meeting at conferences or events is a good way to learn more about not only companies but also the founders and teams behind them.
If you’re comfortable doing so, please share your contact info.
What made you say yes to the last company you invested in?
Our latest investment is led by an awesome founder with a lot of experience in the space she is trying to disrupt. Not only does she have a very unique technology and a great team, but during the pitch she clearly articulated what she had learned from previous attempts at solving this same problem, and why being laser-focused on customer’s needs was key for this company to succeed.
We ended up deciding to lead this round after having several customer conversations that validated this. If the product and solution are that good, you want to hear it from real customers.
When is it too early to start looking for investors?
I like meeting companies early because it is very powerful for founders to say, “This is what I told you I would do in this time, and that is exactly what I did,” when we reconnect again.
When you are ready to start fundraising, you want to make sure you know how much capital you’ll need and what are the main milestones. The days of hand-waving the size of your next round are over, so as soon as you know that, the sooner you can have conversations with investors.
Besides product-market fit or revenue, what are three things a team needs to show you before you sign a term sheet?
A clear understanding of how much capital is needed to scale: What other sources of capital, besides venture dollars, will you be looking for?
A clear articulation of the risks that the business they are building will face — do they think there are execution, market, or regulatory risks, and how do they think about mitigating them?
A clear communication of the big vision for the company — we are investing in huge markets with big problems. How is this company going to look in five, 10, 20 years?
In September 2023, what are the top questions founders need to ask investors?
Having an investor be a board member means being a partner for the next five to 10 years; you want to make sure you know how they work with founders when things go well but also when things don’t go well. Good VCs will be happy to introduce you to some of their portfolio founders so you can hear directly from them.
Also, make sure you understand the fund’s reserves strategy — how much of their capital is reserved for follow-on investments, do they typically follow on, and how do they assess follow-on opportunities?
Can you describe one traditional pitch tactic that no longer works but is still a common practice?
Doing a full pitch and asking investors to save their questions until the end. As a founder, you want to make sure you have an engaged set of investors hearing your pitch. Lots of high-quality questions may mess up the flow of your slides, but will make sure that the VCs understand your business, and it will help you understand how they think and what they’re looking for.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
Short memos often lack real metrics and information to understand why this company is different. If you are sending ahead of time, I find that sending complete decks is a better strategy since VCs will have the time to review and show up prepared with questions.
What are you reading/watching/listening to right now?
While I still like the VC podcasts, I realized I needed a little break from my 100% VC content. I’m alternating between “Nuestra Parte de Noche” (Our Share of Night), which is a psychological thriller set in Argentina in the ’70s and ’80s, and re-reading “Why We Sleep” by Matthew Walker, which I highly recommend.
Karl Alomar, managing partner, M13
What kinds of opportunities are you looking for right now?
I would initially filter opportunities by stage and category. From a stage standpoint, although seed investments can be fruitful and I have made a number of these, my preference is to look for companies closer to their Series A, with validated product-market fit and some early traction in hand.
My general categories of focus tend to be around fintech, web3, productivity tools/SaaS and AI tooling and infrastructure. Having said that, I am also intrigued by businesses outside this scope that generally disrupt antiquated categories and markets although I do generally steer clear of true enterprise businesses or physical consumer product offerings.
How do you prefer to be approached: a cold email, a warm intro, or another method?
Let me apologize in advance: As an investor, I get a lot of inbound email, so it is sometimes difficult to respond to all in a timely manner. The best way to get a hold of me or any investor is through your network with a warm intro.
If there is a way to secure an introduction or some point of reference, it makes it much easier for an investor to filter you and will likely drive a far more efficient response. If the warm intro is not an option, then feel free to email directly, as LinkedIn has a lot of noise and is not often noticed.
If you’re comfortable doing so, please share your contact info.
You can always email me at karl@m13.co
What made you say yes to the last company you invested in?
The biggest driver of decisions for me will generally be the founders and my belief that they can truly build a great business. The last company I invested in combined an incredibly strong founder/CEO who clearly was able to break through walls and make things happen within a company that has clear product-market fit and a category that demonstrates strong potential demand.
However, the key was that the founder possessed a unique ability to secure incredibly preferential terms on all the partnerships he brought to the table, and I could truly see him building the business into a very large outcome. Since investment, the company has already doubled in size and is one of the leading performers in our portfolio.
When is it too early to start looking for investors?
It is never too early to look for investors; however, investors do come in all shapes and sizes. Although angels could support you with an idea, to get to institutional capital, more is needed.
For a seed investment, as a general rule of thumb, I would suggest you have a fully fleshed out plan and economic model with a minimal viable test in hand to validate that there is market interest in what you are offering.
However, for Series A, you need a lot more validation: Ideally you would have proven product-market fit and demonstrated the sales motions that could be repeated and scaled within a reasonable customer acquisition cost. Ultimately in all scenarios, you should come with a clear vision and good understanding of your market and the capacity for scale in your business.
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
There are many variables in assessing each deal that are very unique, but if I were to narrow it down to three core concepts, here is where I would land:
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Business economics: We need to see that the business can scale in a healthy manner and that the economics make sense.
Meaningful target audience: The business target should allow for significant growth and as a result a strong long-term potential enterprise value.
Strong founders/leadership: Most importantly, we will assess the quality of the leaders themselves and assess their ability to inspire with a vision and operate effectively.
In September 2023, what are the top questions founders need to ask investors?
This is a great question and so incredibly important.
Founders should first understand the vision the investor has for their business; it is imperative that vision is aligned. If investors are misaligned with you on the long-term goals, then they will either become disengaged or, even worse, they might become activists looking to influence the business to change course.
Founders should understand how an investor plans to partner and help the business; however, you must dig one level deeper and truly understand if the investor has the resources or capacity to deliver on what they are offering. What will the cadence of the relationship look like and what can the founder rely on? Most importantly, how does the investor behave through a crisis?
Founders should approach an investor as they would an employee interview, especially if you are giving away a board seat. Spend time just getting to know them, do reference checks, confirm that you could spend 15 hours on a plane with them. This will be your work family for years to come.
Can you describe one traditional pitch tactic that no longer works but is still a common practice?
Hubris does not work in today’s market. Founders that come into a pitch overly confident and acting as though they are doing the investor a favor by even showing up might have worked with some investors in the peak times when every good deal was a battle, but now it would close the door on you right away. A great comedic illustration of this might have been the Pied Piper fundraise in the hit TV show “Silicon Valley.”
The market has shifted and investors are ultimately looking for good humans that they can believe in. Come to the table with some humility — confident of course, but recognize that everyone still has something to learn.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
I always prefer a complete deck; it is often hard to really understand a business through a short memo, and with the volume of pitches that I see, I always want to understand all I can before I take a call with the founders directly.
What are you reading/watching/listening to right now?
Reading: I am a fan of the classics with specific books for specific learnings: “Never Split the Difference” for negotiation tactics; “The Lean Startup” for basic building blocks; “The Hard Thing About Hard Things” about operational challenges and the ability to fight through.
However, a modern classic that I love is Ray Dalio’s “The Changing World Order,” which presents an enlightening point of view on the global economic cycles through history, including the one in which we live today.
Watching: I always watch CNBC to get my general market and business updates. I personally love the dynamic they have, especially “Squawk Box” in the mornings, and love that politics and partisanship plays a minimal role in how they report.
Listening: I have a variety of podcasts at my fingertips, but some I might recommend include Jess Larsen’s “Innovation & Leadership,” “Hidden Brain: Making Sense with Sam Harris” and of course TED Talks Daily.
Raja Ghawi, partner, Era Ventures
What kinds of opportunities are you looking for right now?
There are broadly two macro pressures on real assets today: the need to lower costs (to buy, build, and manage real assets) and the impetus to create (or provide access to) new inventory. Startups with products or services that lead to demonstrable cost reductions (e.g., fully replacing a full-time equivalent or a team, meaningfully reducing material prices) or can provide customers with access to otherwise scarce inventory (ideally at superior yields if B2B) pique my interest immediately.
How do you prefer to be approached: a cold email, a warm intro, or another method? If you’re comfortable doing so, please share your contact info.
All of the above. All work well. I prefer short messages to emails, but all are equally good. I’m also always glad to grab a morning coffee with founders at Fort Greene Park in Brooklyn. Just DM me on LinkedIn or X (formerly Twitter) @rajaghawi.
What made you say yes to the last company you invested in?
An N of 1 founder based on their prior work experience and track record in raising both venture and real estate debt and equity capital at scale.
When is it too early to start looking for investors?
It’s never too early to get to know early-stage, sector-specialist investors, especially for founders from outside the industry. Combining fresh, outsider perspectives with insider knowledge can often result in very creative solutions to long-standing problems.
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
- ROI, and not just in terms of time saved for an end user, but in terms of hard dollar savings (or improved yields) for whoever they sell to.
- A realistic path to a large business outcome (ideally an IPO) against conservative market penetration assumptions. The built world is massive and we want to see founders building toward real change in the world’s largest asset class.
- Little to no competition: If the opportunity is so obvious and the solution is so easy to build that 7+ well-funded teams are all competing for it, we’re not the right investor for you.
In September 2023, what are the top questions founders need to ask investors?
This month and every month, founders should run proper investor diligence and speak to other founders in those investors’ portfolios. Now more than ever, founders should take a selective and prudent approach to building their cap tables and ensure that all new investors are committed to being part of the company journey for the long haul, especially after a period of time marked by easy money from tourists and fair-weather VCs.
For early-stage founders in particular, my advice is to prioritize hands-on investors who are excited to roll up their sleeves and augment your team, which is something they should be able to confirm from talking to other founders in those VCs’ portfolios.
Can you describe one traditional pitch tactic that no longer works but is still a common practice?
Some founders still believe that creating urgency and asking investors to conduct diligence in two weeks is a winning tactic. This approach rarely works in today’s market environment, where VC deployment pace is much slower and more measured than it’s ever been in recent memory, and could even lead to adverse selection challenges.
Unless you have off-the-charts growth and efficiency metrics, are a presumptive category leader in some massive hot market, or are a “French technical founder who fled socialism to build your company in America, or a Christ-like figure of any kind,” then please spend a reasonable amount of time in the arena trying stuff, learning, and familiarizing investors with your business all the while vetting them as potential long-term partners on your journey.
What are you reading/watching/listening to right now?
I’m currently rereading “On Identity” by Amin Maalouf and “Starter Villain” by John Scalzi (where cats and sketchy VCs really spice up the plot), having just finished “The Hitchhiker’s Guide to the Galaxy.”
Anamitra Banerji, managing partner, Afore Capital
What kinds of opportunities are you looking for right now?
At Afore Capital, we look for pre-seed stage companies that want to raise sufficient capital to give themselves a good chance of raising a Series A next. We look for founders with a unique product edge.
How do you prefer to be approached: a cold email, a warm intro, or another method? If you’re comfortable doing so, please share your contact info.
A referral through our portfolio founders is probably the strongest referral source but we are open to all paths, including my email (anamitra@afore.vc) and online applications (https://www.afore.vc/afore-alpha).
What made you say yes to the last company you invested in?
Amazing founder drive + daily iterations on the prototype + promising customer feedback.
When is it too early to start looking for investors?
When a founder is pre-idea, it’s probably too early to talk to investors. But some investors can also be helpful in the ideation process.
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
The greatest strength that startups have that larger companies don’t is speed of iterations and learning — on the product, market discovery, recruiting candidates. The second thing that is inherent in great founding teams is making good decisions with limited information; this ability also helps in moving fast.
In September 2023, what are the top questions founders need to ask investors?
Founders should make sure that the investor is the right fit for the company no matter where we are in the economic cycle.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
Deck or memo, both are fine. Decks are faster to process than memos.
What are you reading/watching/listening to right now?
I am reading “Play Bigger”; it’s a good book on positioning and category building. The book argues that new entrants shouldn’t try to be better than incumbents, but rather be different from incumbents.
Mukaya (Tai) Panich, CIO and CEO, SCB 10X
What kinds of opportunities are you looking for right now?
Startup opportunities we are very interested in right now are startups that combine AI with blockchain to solve problems in the crypto and blockchain space.
We like startups that use AI to solve problems in crypto/blockchain business because it has a stronger moat and because it is harder to have founders and teams who are strong in both disciplines. The two specific areas that we are interested in using AI to solve problems in crypto/blockchain are:
AI for prediction: AI in general can be used to process large amounts of information in parallel. Using AI is very beneficial because blockchain has huge amounts of on-chain data. AI can be used for more accurate prediction models for blockchain.
Using generative AI to solve UX problems: There is a lot of excitement in generative AI right now, especially with regard to how to improve UX/UI with generative AI — which can give human-like interaction or improve business processes. So there are many people that want to use generative AI to solve UI problems in blockchain like on-chain data search with human-like responses.
How do you prefer to be approached: a cold email, a warm intro, or another method? If you’re comfortable doing so, please share your contact info.
I prefer to be approached via a warm introduction. I like to see people who hustle and go the extra mile to be connected to get themselves known. A warm introduction by someone both parties know always establishes legitimacy for both sides.
My contact is: mukaya@scb10x.com
What made you say yes to the last company you invested in?
The founder’s background strongly matched the area of problems they are trying to solve.
When is it too early to start looking for investors?
When you still don’t have the idea yet what you want to build. The VC you want to raise money is not there to bounce ideas off of — unless that VC is your good friend.
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
That the founders dream big and show strong vision and goals and are not afraid to try to get there. That they are all in. Would like to see the core team members — founders — are all full-time. If the co-founders come to pitch together, they should get along — and not fight to speak. If they can’t even get along in the pitching to VC stage, it is very likely that it will not end well.
In September 2023, what are the top questions founders need to ask investors?
Will you be there to continue grinding out with your startup if the downturn continues?
Can you describe one traditional pitch tactic that no longer works but is still a common practice?
One traditional pitch tactic that no longer works but is still a common practice: Trying to get a high valuation by creating FOMO (fear of missing out).
Are you open to reviewing pitch memos, or do you prefer a completed deck?
I am open to reviewing either pitch memos or a completed deck. I want to see how seriously you are about thinking about the problem you are trying to solve.
What are you reading/watching/listening to right now?
I love listening to “Invest Like the Best with Patrick O’Shaughnessy.” I like how he asks the questions that go deep into why people do things or what makes people tick. And the favorite question in every episode, with all the guests is “What is the kindest thing that anyone has done for you?”
For crypto, I like to listen [to] “On the Brink with Castle Island,” Matt Walsh and Nick Carter’s weekly podcast about what’s happening in crypto space and the deal update. For AI, I like to listen to “No Priors,” podcast on AI by Sarah Guo and Elad Gil, very good interview of founders building in AI.
I’m reading “A Curious Mind: The Secret to a Bigger Life” by Brian Grazer — talking about how curiosity increases happiness and is the key for innovation and disruptive thinking. And “All in on AI: How Smart Companies Win Big with Artificial Intelligence.”
David Phelps, founder, chairman, and CEO; Merlin Ventures and Merlin Cyber
What kinds of opportunities are you looking for right now?
Merlin Ventures is always looking for differentiated technologies that solve an actual pain point and is a significant enough problem that organizations want to prioritize budget to solve it.
We’re always interested in exploring better ways of handling identity security and cloud security. We’re also seeing some interesting solutions at the intersection of humans, cybersecurity and AI, specifically ways to leverage AI to make humans more efficient. Securing AI is also a critical area; however, this space is getting crowded quickly, so a prospect would need to demonstrate a truly differentiated approach to catch our attention.
How do you prefer to be approached: a cold email, a warm intro, or another method?
I prefer a warm introduction from another VC or someone else in my network. The vast majority of deals that go through don’t start with a website submission, but from an introduction from a trusted colleague because that’s a good sign that they’ve already had some initial vetting.
If you’re comfortable doing so, please share your contact info.
Ideally, companies will leverage their network to forge a connection with us, but if not, they can always get in touch with us via our website: www.merlin.vc.
What made you say yes to the last company you invested in?
I said yes to the last company we invested in because it was led by a very compelling entrepreneur in a differentiated space. Marina Segal is the CEO and co-founder of Tamnoon, and she has nearly two decades of experience in the cloud security space.
She saw a problem that needed to be solved and can use her expertise to tackle the problem in a unique way. At the stage we’re investing in, the most important aspect is the team, their knowledge and their unique approach to the market, rather than the product itself.
When is it too early to start looking for investors?
If you know investors, it’s worth picking their brains very early on. We like to talk to founders once they have a team assembled and have identified a domain and a specific pain point they want to approach. For us, it’s not necessary to have a fully developed product before we’ll start to engage. We like to be involved early on to help with ideation when we can.
Another aspect to consider is what type of investor you’re looking for. Investors have different focus areas, specific industries they like to work with, different stages of companies they invest in, etc. VCs that focus on a particular vertical will know that ecosystem well in terms of customers, design partners, acquirers, etc., giving companies in their portfolio a huge advantage relative to others in the space.
You need to do your research, know which investors would be the best fit for your company and be prepared to pique their interest.
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
First, they need to demonstrate a hunger and a drive for achieving their goals. I want to see founders who will stop at nothing to make their aspirations a reality.
Second, I want to see a team that we can work with. A team that will take advice, listen, and collaborate effectively.
Last but not least, I need to see the domain expertise of the assembled team. Answer these questions for me: “Why you? Why will you succeed more than others in this space? What experience or skill set uniquely qualifies you and your team to solve this problem?”
In September 2023, what are the top questions founders need to ask investors?
The No. 1 question founders need to be asking investors right now is, “How have you supported your portfolio companies and helped them succeed?”
Founders need to understand what value investors can provide to actually nurture their portfolio companies and help them grow. I strongly advise founders to ask these questions not just of the investors themselves, but pose these questions directly to their portfolio companies. You want to hear from the horse’s mouth how these companies have been supported.
Can you describe one traditional pitch tactic that no longer works, but is still a common practice?
If someone can’t name competitors or claims they don’t have competitors, that’s a red flag that they don’t understand their market.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
I’m open to speaking with founders at very early stages, even if they’re still ideating. However, when it comes to reviewing an actual pitch, I prefer a completed deck. A three-page write-up is not going to get my attention.
If you have enough data points to pull together a short pitch memo, then I’d rather you take the time to build out a fully completed deck.
Kavita Gupta, founder and general partner, Delta Blockchain Fund
What kinds of opportunities are you looking for right now?
We are investing in pre-seed and seed-stage blockchain technology companies. These are companies that not only have adoption within the blockchain and crypto user space but also extend their reach into the Web 2 institutional sector.
How do you prefer to be approached: a cold email, a warm intro, or another method?
A cold email is acceptable, but when there’s a warm intro, it naturally brings a level of credibility built in. We’re always open to new ideas and we don’t dismiss a deck even if it’s a cold approach, but of course then it takes longer to build comfort.
If you’re comfortable doing so, please share your contact info.
We are comfortable to [have people] reach us at my email: kavita@deltafund.io
Besides product-market fit or revenue, what are three things a team needs to show you before you’ll sign a term sheet?
First, we need to review the product’s code. We typically do this under a signed NDA or within a sandbox environment. If it’s an analytical platform, we dive into the underlying logic. Second, if the company has one, we conduct reference checks, whether it’s with a POC, a customer, or any other leading investor.
This helps us gain insights from the investor’s perspective and understand any associated aspects. Additionally, it’s important we perform diligence on their past work experience or involvement in other companies by conducting reference checks.
In September 2023, what are the top questions founders need to ask investors?
I would love it if a founder, during their pitch, asked me, “Do you see this gap, and have you come across different solutions to it?” If the founder doesn’t view the investor call as a learning opportunity, then it seems like they are set on their own path.
I enjoy the conversations where founders ask, “Have you encountered other ways of solving this, and do you consider them ideal? After hearing about a particular approach, does it change your perspective? If you’re interested in partnering with us, how do you envision a strategic way to join us? What unique value can you bring us as investors? In case we make errors or have questions, what level of support can we expect from you?”
These are my top considerations.
Can you describe one traditional pitch tactic that no longer works but is still a common practice?
I’m tired of hearing, “Let me tell you about my billion-dollar idea.”
Please refrain from starting with a money-focused pitch. Instead, open with a clear description of the problem we’re addressing. Share a real-world example of someone who has encountered this problem. Discuss how widespread this problem is, what your solution will be, and your competitive advantages.
Avoid the “This is a billion-dollar idea because my competitors made billions’ approach.” It’s not about emulating their success, but rather addressing a genuine need.
Are you open to reviewing pitch memos, or do you prefer a completed deck?
I prefer a full deck over pitch memos, unless it’s a founder I’ve known for a long time and would want to build with. I want founders that have thoroughly considered all aspects of their project and be prepared to commit to the thought process. A complete deck allows for a more comprehensive review by others.
What are you reading/watching/listening to right now?
Unfortunately, I’m not reading anything right now but I am tuned into Lex Fridman’s podcast. I believe he delves deeper under the surface into a lot of different topics that pique my curiosity and expand my knowledge beyond my usual sphere.