Non-Horror Story Lessons from Pitching VCs

Over the last week, I’ve enjoyed reading some of the different VC horror stories sparked by Greg Isenberg’s tweet. There’s everything from crazy bad behavior to unusual interactions to a variety of positive and uplifting stories.

While my time pitching VCs was many years ago, I’ve done it dozens of times and have had a few memorable experiences of my own.

The first one that comes to mind is when a VC in the Northeast pursued us aggressively. He kept reaching out and asking for updates, and not knowing any better, I kindly obliged and spent time with him. At one point, he wanted to get more serious and do a deeper dive on our business, so I shared a little more information. Then he went quiet.

He had already asked for and received a bunch of intel from me. Then, six weeks later, the announcement came out. He had just led a huge funding round for our direct competitor.

Lesson learned. Or not.

The next story comes from pitching one of the most famous venture firms on the West Coast. I had gone out there several times and had a decent rapport with the partner. After meeting three or four times, he shared that they had never seen venture-backed returns in the marketing software market and didn’t believe it was going to be a big opportunity. It wasn’t per-seat pricing, and they didn’t see a mechanism for a different type of financial model based on usage.

They politely passed.

Then, of course, six months later, they funded one of our main competitors, a different one than the Northeast firm.

My takeaway after those experiences is to always assume that VCs are looking at all of the players in the space, and that the information you share is going to the investment committee and will be used as part of their decision to invest in the space, regardless of whether they invest in your company.

My final story is one on valuation. We had just cleared $1 million of recurring revenue, were growing over 300% year over year, and pitched a regional VC. After a number of conversations, we received a term sheet. It was for a $2 million pre-money valuation.

This was after tons of paying customers, clear product-market fit, and over $1 million in recurring revenue. We negotiated a little and they upgraded the offer to $2.5 million pre-money valuation. Then we shared that it wasn’t worthwhile to raise money on those terms.

We left on a good note, but it helped me understand that there’s a huge timing element in the market based on what’s popular and what’s not.

We decided to bootstrap and continue building the business without raising outside capital.

At the end of the day, raising money from VCs is a tool, not a milestone. For the right company, in the right market, at the right time, it can help accelerate growth and create something much bigger than would have been possible otherwise. But it also comes with expectations, pressure, dilution, and a different definition of success.