Raising pre-seed rounds can be a challenging process, and the first hurdle for many founders is getting through the venture capital (VC) screening process.
VCs receive a large number of proposals every day and only a small percentage of them make it to the next stage. Here are some tips on how to get through the VC screening process when raising pre-seed rounds.
1. Personalise your cold email pitches to VC — avoid generic messages as well as cliches.
The better a VC understands your product or service and what you’re asking for, the easier it will be to evaluate your company or conduct a meeting or schedule a call.
- A Click-worthy Subject: no longer than 6 words (or under 45 characters)
- Introduce yourself and your company In one sentence
- What your Product/Service/Brand is doing to solve a problem
- How your startup is currently doing (with precise numbers)
- Define Your Ask: be direct and ask for exactly what you want from the VC firm. You have to decide if you’re emailing a VC for their advice, their capital, or for a referral to someone else in their network of investor contacts.
You should be aware that VCs are most of the time overwhelmed with requests. An investor receives on average 10 unsolicited emails per day.
They don’t have time to waste trying to understand what you were trying to deliver or say. So the easier your message is to understand, the better your chances of them opening your email and responding.
Keep the email body under 1,000 characters. It's a universal rule: the longer the email, the less likely you’ll get a reply.
2. Be specific with the amount you need to raise and how you plan to use this money
- Adding specific numbers shows you know your needs and demands. It also helps VC evaluate your trajectory.
- List high-level plans for the money you will raise: focus on hiring plans as well as launches of features and new locations.
- You should also set a progress goal for your next round. For example:
- Hiring: 4 engineers, 2 sales, 1 customer success.
- Integrate with AWS, Azure, and GCP.
- Goal: $1M ARR in 18 months & raise Series A.
3. Fill your calendar with investor calls — 10+ calls/week
- Make sure to be ready that finding an investor or partner might be a full-time job
- Consistency is key, try to schedule at least 10 calls a week.
4. Use only proven numbers and stats in your pitch
The pitch should contain 200 words or fewer on the problem, customer, market size, innovative solution, competitive advantage, and traction.
You can go on at more length if your pitch is particularly compelling, but we’d actually suggest attaching a one-pager or directing investors to the website or app for more information.
It would be pretty obvious for experienced investors to understand whether you are exaggerating or not, so try to stick to real numbers and metrics.
Don't ask if you can send your pitch deck in the next email. Attach your pitch deck to begin with.
5. Do research — not every VC is your target
It is important to understand two key factors:
- Who the VC is and their investment philosophy and
- What they are looking for in a company.
Research the VC’s portfolio of companies to get a sense of their investment style and areas of focus.
Make sure you are targeting people who are investing in your product area or in similar companies. It seems obvious. But you’ve got no chance if you target a random group of VCs.
So, do your homework and make sure the firm is investing in similar companies, and identify the partner that actually does investments in your business area.
6. Make a clear pitch and deck
Your pitch should be clear, concise, and easy to understand. Highlight the key points of your business and make sure to explain why it is unique and why it will succeed.
Don’t focus on creating the perfect 40-slide deck you spend three months preparing with a team of copywriters and designers. Keep it short and sweet — include only the key information you want investors to have on hand when they’re reviewing it after your presentation. More than 15 slides are too much detail for a pitch deck.
7. Prepare yourself
Be ready to answer any questions the VC may have about your business, market, and competition.
Be prepared to provide detailed financial projections, customer validation, and any other relevant information that demonstrates your business’s potential.
8. Show Traction
VCs want to see that your business has momentum and is making progress. If you have traction, be sure to highlight it in your pitch.
Traction can come in the form of customer validation, pilot programs, early-stage sales, or any other metric that shows your business is making progress. Here’s a clip of founder and early-stage investor Max Flietmann describing how founders can present traction even before they have strong product usage metrics.
9. Expand your network
Networking is a key part of the VC screening process. Attend industry events, meet with VCs, and get to know the startup community.
Building relationships with VCs and other entrepreneurs can help you get in front of the right people and increase your chances of getting funding.
10. Build a strong team
A strong team is essential for any successful business. Highlight the experience and expertise of your team members and explain why they are the right people to build and scale the business.
Getting through the VC screening process when raising pre-seed rounds requires a clear pitch, preparation, traction, a strong team, and networking and all mentioned above. By following these tips, you can increase your chances of getting through the screening process and securing funding for your business.
Want to learn more about the metrics you need to raise pre-seed or seed stage funding? Join Michael Lapidus (author of this post) and Vidar Mortensen for a roundtable discussion this coming Monday, March 6th.