I remember it clearly: we were less than a year into Pardot and a venture capitalist reached out to us asking to talk. Excitedly, we set up a time for the call and waited anxiously for the date. Finally, the day arrived and we talked for 45 minutes only to realize that it wasn’t a good use of our time: the associate’s firm requires potential investments to have at least $5 million in annual recurring revenue whereas we had less than a million.
Here are a few thoughts on calls from VC associates:
- Associates cast a wide net and engage with as many entrepreneurs as possible, regardless of whether or not they’re a good fit yet
- While associates source deals for the partners, most of the firm’s investments come from referrals and existing partner relationships — not from associates cold calling
- Know that associates aren’t the decision makers at the firm and that they spend a huge amount of time cold emailing and cold calling startups (not too different from a sales rep)
- Before taking a call from an associate, ask a number of qualifying questions, and only take the call if raising money is on the horizon (remember that the best time to raise money is when you don’t need it)
- If getting ready to raise money, associates can be a good testing ground and opportunity to practice the pitch
- Make an ask at the end of the call to be introduced to three portfolio companies that might be potential customers
In the end, most entrepreneurs shouldn’t engage with associates unless they’re going to raise money in the near-term and they’ve pre-qualified the firm to ensure it’s a good fit. Too often, entrepreneurs get excited when a VC associate reaches out and it’s not actually a good use of time.
What else? What are some more thoughts on entrepreneurs and calls from VC associates?
4 thoughts on “Entrepreneurs and Calls from VC Associates”
Best to get an intro to the top guys from someone they respect and ideally worked with. And then build a relationship from there. Many VCs want to invest in the jockey and not the horse so the better the jockey and the team the better your chances. Most VCs don’t want to work woth firms remotely so a Silicon Valley VC may seem appealing but the reality is that in the ATL we are geographically undesirable for them unless they have other active deals in the region. Stick with the Angels at first and get to know the VCs so when your biz starts to hit J curve growth you have relationships with VCs and have started to build a relationship too. If your business is stretched to exit for less than $200-$300mm the big VCs won’t be very interested but possibly a smaller boutique firm. Atlanta is more a city of Angels so max this out first.
Any thoughts about responding to each associate that leaves a voicemail or email that you are not interested in talking with, or timing not right? It is exhausting and time consuming to respond to each one, even with a no-thank you or the timing isn’t right, because they always want to hear more. Will it hurt your chances later (when you need them) to not return the calls? Seems like a catch 22…you need to be spending your time on building the business, not returning phone calls and emails, but you might get snubbed later.
I wouldn’t worry about responding to every voicemail or email. No matter when you reach out, assuming you meet their criteria, the associate will take your call.
Let’s say you get a call from a firm who clearly targets companies at a later stage than yours.
The charitable interpretation of the “associate call” is that they are looking for future deals for their firm, and think you might grow into such a target.
The uncharitable interpretation is that a partner at the firm is looking to invest in a more-mature competitor of yours, and has assigned the associate to do due diligence. So, by validating the market demand, you could be indirectly helping to finance a competitor.
The sad interpretation is that the associate is between deals, but can’t afford to look bored at the office, so he is calling up random CEOs and getting educated on hot new trends. That’ll improve his or her own skill set, but isn’t likely to get you a check.
And, from your perspective, it can be hard or impossible to tell these three situations apart.
Like Woody Hayes said: “If you throw the ball, three things can happen and two of them are bad.” Be cautious taking the call.