Source: Ricky Pelletier, OpenView Venture Partners
I hear it over and over again: “I have no plans to raise outside capital right now, so I don’t think speaking would be a good use of our time. I’ll reach out if things change.”
This (or close derivatives of this) is, by far, the most common response I get from a CEO the first time I reach out. Sometimes, it is a bootstrapped company with no outside investment. Others may have raised a few rounds of institutional capital at this point and don’t see a raise in the near future. In either case, I believe the CEO is missing a huge opportunity by blindly turning down calls from potential investors.
I agree – when running a startup, a CEO’s time is an extremely valuable asset and is highly coveted by everyone around him or her (employees, investors, board, management, family, etc.). I realize, wholeheartedly, that finding 30 minutes to speak with a single investor can be challenging – and chances are if one VC is reaching out to you, 25+ are calling you! That said, I believe it is extremely important to take those introductory calls for many reasons:
1) While you may not need capital today, you don’t know what the future will look like
Yes, you can reach back out to all of the folks that called you when you are ready to raise, but wouldn’t you rather have a ‘short list’ of pre-vetted investors based on earlier conversations who you would prefer to work with?
2) You’ll be surprised at what you can learn about your market from these calls
Given investors speak with thousands of companies each and every year, many of which operate in the same broad market (not necessarily competitive), there is a good chance they could offer a unique perspective on some of the market dynamics that can only be achieved from their position. By no means does this mean divulging competitive information, but rather swapping notes on the market more broadly.
3) Expanding your network is never a bad thing
Whether that means directly with the VC on the other end of the line or perhaps with their portfolio. There may be plenty of ways to work together in the future that do not include a direct investment!
4) You may learn something new about a VC’s model and or process
It may shift your thinking with respect to outside capital. For example, you may hear about their value-add approach and be excited about what those services and expertise can lend to your business and how it can accelerate growth (outside of the sheer capital investment).
5) It is a great way to collect valuable feedback (both positive and negative) on your business
You may uncover some new ways to think about how you approach and manage your business by hearing some outside perspective on your model.
There are plenty of other reasons to take the call, as well. If fitting them in throughout a day proves to be a challenge, my recommendation is to schedule the calls on your way into work or heading home. Keep the introductory calls to 15-20 minutes and keep them relatively one-sided — this should be your opportunity to learn about the VC, their approach, and ask questions about how they can be helpful to your business.
If that proves to be a good use of your time and you like what you hear, set up a follow-on call where there can be some mutual sharing/learning, and start to build the relationship over time. Maybe it leads to an investment down the road and maybe it doesn’t – either way, you’ll make a new contact, perhaps some new business relationships, and hopefully learn something new. Very rarely are these calls ever a true waste of time!
About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance LLC has offices throughout the southeast including Charlotte, Raleigh/Durham, Greensboro, Wilmington, Washington D.C. and South Florida with a team of more than 30 professionals serving more than 100 companies throughout the region.