It’s too early to determine whether SVB’s downfall heralds a new era for venture capital, but based on anecdotal evidence, off-the-record discussions and chats with co-workers, it seems like we’re back to business as usual where pre-revenue startup fundraising is concerned.
Not a scientific sampling, but several investors signaled this week on Twitter that they remain interested in talking to founders who are still at the idea stage. My hot take: With contagion contained, the VC community feels good about writing smallish checks for pre-revenue startups, but Series A and up? Más o menos.
As long as this downturn persists, this investor Q&A will be a monthly TC+ column. If you’re a recently laid-off worker considering striking out on your own, an H-1B employee who’s had it up to here or just looking for tips and advice that can help you connect with early-stage investors, please read and share.
Thanks very much to all of the investors who took the time to answer these questions in such detail! If you’re an early-stage investor who wants to be included in future columns, email guestcolumns@techcrunch.com with “How to pitch me” in the subject line.
Here’s who participated:
- Brian Backeen, general partner, Lightship Capital
- Masha Bucher, founder and general partner, Day One Ventures
- Rebecca Liu-Doyle, managing director, Insight Partners
- Clelia Warburg Peters, managing partner, Era Ventures
- Nick Adams, managing partner and co-founder, Differential Ventures
- Lisa Lambert, founder and president, National Grid Partners
- Elizabeth Yin, co-founder and general partner, Hustle Fund
Brian Backeen, general partner, Lightship Capital
What kind of investment opportunities are you looking for in March 2023?
Like many investors, we are bullish on AI. We made two AI-related investments in April and continue to look for opportunities in that space.
How do you prefer to be approached by a founder with their initial pitch: a cold email, a warm intro or another method?
We have an online portal at lightship.capital that founders can use to apply for investment. We do that to prevent an issue with VC investors called “network bias.” Founders should apply on our portal and follow on Twitter.
What’s one traditional fundraising tactic that founders should remove from their toolkit — something that no longer works but is still a common practice?
Asking for warm intros and trying to “build a relationship” with investors. Spend your time building a great business and you will gain investment. I don’t need new friends.
Tell us about the best pitch you’ve received recently. When during their presentation did you realize you were going to invest?
I was pitched by a firm called MuseTax recently. Excellent founders, subject matter experts, the real deal. They made me want to invest in the first 10 minutes. They are in diligence now.
Can you share one piece of advice that can help a first-time founder stand out?
Don’t focus on investment; focus on design. Don’t let your engineers build you an ugly product with a great password reset function but limited user value.
Don’t let the engineers tell you it’s not ready; it is. Push it out and learn.
Design it well and users or investors will follow. Engineer the first version well and you will end up with lots of engineering bills and no progress.
What are you reading/watching/listening to right now?
I keep rewatching season 1 of “Billions.” You know, before it got weird 🙂. Great show.
Masha Bucher, founder and general partner, Day One Ventures
What kind of investment opportunities are you looking for in March 2023?
During a healthy fundraising environment, the founders that do the best often lean into their storytelling prowess and can convince investors with their charisma. They’re the ones who are naturally good speakers and are articulate with their vision.
There’s a second type of founder with a different background. They’re often heads-down, scrappy and resource-oriented. I call them “survivors.” Survivors are often immigrant founders, people of color, women or others from underrepresented backgrounds.
I believe the survivors are the types of founders to back during a downturn. They’ve been pushed to be scrappy and survive their whole lives; they’re especially equipped to handle what the current times demand of them. They’re good at making something out of nothing and are extremely cost-efficient.
I’m looking for paths to monetization, business models and avenues to profitability. Investors are paying much more attention to numbers, business models and how well founders manage finances. Expect many more questions challenging the business model.
I’m looking at how much revenue comes from product quality versus marketing. Founders who generate virality based on the product’s quality show they can make money with little marketing spend.
We love companies with high EBITDA. We love companies like Quinn, which grew to millions in revenue in just a year from launch with viral, zero-cost marketing on TikTok.
How do you prefer to be approached by a founder with their initial pitch: a cold email, a warm intro or another method?
Cold email works great, but it’s surprising how few people can do it right. In a cold email, every single sentence should be convincing me to take a meeting. With every word and every sentence, you need to create the desire for an investor to meet you in person. You have to show a clear reason why they need to meet you now, not next month.