- Most investor meetings will not result in a meaningful follow-up.
- Generally, VCs follow up aggressively with startups and founders that they find compelling.
- Investors are interested if they are engaging. Everything else is a form of "no."
- Term sheets are a natural outcome of investors engaging and founders parallelizing conversations and maximizing momentum.
Most First Meetings Will Not Result in a Follow-up
The first meeting with an investor is meant to be an overture to further conversations where both sides to get know each other better.
But most meetings will not result in a meaningful follow-up. It is quite common to have a low percentage conversion - certainly below 50% and sometimes even in the single digits - from a first meeting to an investment. That shouldn’t be a surprise: investing in early-stage companies is a low-probability event to begin with, and requires that a whole bunch of things come together at the same time.
Just move on to other investors - and keep going until you get the job done. Remember: it’s a numbers game and you only need one yes.
Let Follow-ups Happen Organically - But Do Your Part
It is common to let investors take the next step after a meeting. Of course, you can write a thank you note if the meeting was particularly exciting. But as a general rule, VCs follow up aggressively with startups and founders that they find compelling. Investors do that so they can delve deeper and get to know you and your startup. Ultimately, the hope is that they build enough conviction to partner with you and lead your funding round.
Nevertheless, founders have several tools at their disposal. The first and most important one is to keep meeting more investors. I keep repeating that so hopefully it is obvious by now.
Another useful tool is to leverage the advantages I mentioned earlier - such as good news, PR, and events. Sharing those with your network and engaged investors can help build momentum.
Finally, make sure to backchannel key information to investors via your network. That won’t convince a skeptic, but it can help motivate a slow or distracted VC.
Interpreting Investor Responses
As founders engage more and deeper with VCs, they frequently ask for help interpreting investor responses, which can appear confusing. Let me clear things up:
Actions speak louder than words. Investors are interested if they are engaging.
Examples of such follow-ups include asking for another meeting, suggesting to talk to other partners or friends of the firm, running references on you, wanting to talk to customers or partners, and so on. You should engage with such follow-ups, while maintaining that you are not fundraising yet. Because that is what it’s really all about: both sides getting to know each other.
Anything else means they are not interested. For example:
- “I think what you are working on is amazing. Please keep me posted, I’d love to support you.” - that is a soft “no.”
- “You are really onto something. I’d love to invest - ping me when you get a lead investor.” - that is a soft “no.”
- [crickets] - that is a (less) soft “no.”
- “Thank you for spending time with me the other day. While I am impressed by your vision, I don’t think that your startup is a good fit for my investment thesis at the moment. I wish you luck as you build your company.” - that’s a clear “no,” which deserves respect just because it is so rare to get one.
You may notice that most of the “nos” above don’t sound like a typical “no.” That’s because investors don’t have any incentive to actually turn you down. After all, while preclude an option, which may turn out interesting down the road? Many funds continue to grow in size, so even if an investor misjudged at your seed round, perhaps they can invest at the A round. And a non-“no” like some of the examples above gives plausible deniability - it’s not that they didn’t want to invest, they just missed you.
Experience shows, time and again, that founders love investors who are straight-shooters - even if they pass. Alas, the behavior I described above remains quite common. Just make sure to see the responses you get for what they really are, rather than what you want them to be. Spend your time productively by focusing on investors who are remain engaged as well as starting more conversations with other VCs from your investor list.
Term Sheets Happen Organically
Here is how the fundraise tends to come together:
You do a bunch of first meetings. Most of those have go nowhere, and that’s fine.
A few result in a soft “no” like the examples above. That’s fine too - you can circle back with those investors once you have a term sheet and are building your syndicate. Some of these VCs might even want to invest based on the strength of your lead.
Most importantly, a handful of investors keep engaging, asking for follow-up meetings and additional information. Throughout that process, you are getting to know them better as well as doing due diligence by talking to other founders they have backed. The VCs are doing the same in parallel.
You continue to maximize momentum by parallelizing conversations, leveraging your network, and using any advantage you have at your disposal. Engaged investors understand that you are going to wrap up this fundraise in the near future, so they respond with appropriate speed and make forward progress on a weekly basis, some staying in the conversation, while others drop off.
In the event of a successful fundraise, this process naturally culminates in a term sheet from an investor with sufficient excitement and conviction. That marks a critical turning point, which I discuss in the next chapter.