Guerrilla tips for raising venture capital

I was 27 when I raised my first round of venture capital for Academia.edu, around $600,000 from some London investors. Since then, I’ve raised close to $18 million from investors like Spark Capital, True Ventures and Khosla Ventures. I’ve learned a few lessons along the way that I thought might be beneficial to entrepreneurs starting out.

Rule number one: You should be embarrassed by the sheer audacity of your vision!

Think big about what the company you’re building may be like in ten years if all your dreams come true. What kind of world would you want to create if you had a magic wand? That is what you want to be pitching to a VC, as that is the outcome that matters to them.

An entrepreneur will be thinking about today’s problems, and maybe thinking 6 months out, but you have to train yourself to look into the crystal ball and become eloquent about the ten year view. VCs know there is a lot of risk and they want to see what wondrous things will happen in return for the amount of risk that you are offering them. So offer them a lot of wondrous things.

When I first wrote down the mission statement for Academia.edu, I was embarrassed. We aspire to accelerate scientific research and help find cures for diseases by building a completely new system for scientists to share their papers and peer review each others work. It felt self-aggrandizing and arrogant to say that a tiny company with five employees could accelerate science. And yet, after saying it a few times and thinking through the narrative of how we get to that point, you start to get comfortable with the audacity of the mission. You will stop being embarrassed as the words trip off your tongue.

VCs are looking for the ten-year level of discourse, rather than the six month level of discourse. Being in an investor meeting is actually the one environment where you can let you imagination rip. It’s not only acceptable to do that but its expected.

Master the Macro Stats

Many entrepreneurs start by solving a problem they experience themselves. They feel the problem intuitively and have an intuitive feeling that there is a decent number of people who experience the problem. But that’s not enough. When pitching a VC, you need to have at your command the macro stats for the industry, because that is how they compare your problem with another idea that someone else is pitching. Intuitions are not enough to make the comparison, and for the partner to pitch his/her colleagues – there needs to be some market data about the size of the market etc.

The reason entrepreneurs often skip this step is that it can be really hard to gather market sizing data. As far as I can tell, the only person who’s ever calculated the number of academics in the world is me. Collecting that data took a decent amount of time.

Many entrepreneurs who haven’t done this work will bullshit or semi-bullshit when a VC asks a market sizing question, and the VC is very used to this, and is very good at detecting lack of expertness “um, yeah, er, the market size is $9 billion’. A VC sees straight through that because they get exposed to it so much. You need to answer in a really confident way with as much material as possible to overcome any feelings of doubt from the VC.

Resist the temptation to be overly obliging

You are asking for capital, but don’t think of yourself as a supplicant, and don’t let that control your intellectual approach. You are a busy person who is an expert on your space, and make sure they realize that. If there is a poorly thought-out question or suggestion, don’t humor it just because you want to be polite. Be confident and treat it just as if one of your colleagues suggested it as opposed to some higher being. I.e. don’t be rude, but don’t give it any time if it is not worth any time. Feel free to say ‘that’s not a scalable way of solving this problem; you just aren’t going to get the buy-in from users’. You want the VC to realize that you are a formidable person who is going to impose their vision on the market place and nothing is going to get in your way. So be dominant in the room with the VC about your area of expertise, and don’t be meek and obliging.

On a second, but related note, if someone offers help and it is moderately useful but not that useful, don’t pretend it will make more of a difference to your company than it will.  When a VC is romancing you, and telling you about the advice they can bring to the table, the temptation is to romance back: “Thanks! That would be so great! It’s a match made in heaven.” Better to call it as it is – if the advice is helpful, great, but don’t go overboard in your enthusiasm.

Projecting a strong, independent stance is actually more powerful than being overly enthusiastic about the help or suggestions coming your way. I only realized this point after Ben Ling at Khosla Ventures said, “one of the thing we liked about you Richard is you’ve got your own clear vision of the company and you’d be open to ideas from Khosla, but not dependent on ideas from us, and that you’re going to be running the business as you see fit. We like that kind of founder.”

Lock eyes with everyone in the room

With some VCs you are in competition either with their iPhones, or with meeting fatigue, or both. It’s frustrating to pitch to a room of VCs where some people are checking their iphones, or their eyes are drooping.

How do you avoid this? A few tips. You want to lock eyes with VCs and just move around the room and continue to lock eyes, and never let your eyes hit the floor as you transition between points. If someone is looking at their iPhone you can continue to talk to them directly until they feel sufficiently embarrassed as they hear your voice coming in your direction to put their phone down and look up.

Interestingly enough I have never experienced this from a top tier VC – not once. Top tier VCs uniformly give the entrepreneur their full attention, and it’s a rewarding experience to pitch them.

Another tip is that you don’t want the deck to control the flow. Too much slideware and people’s eyes start to glaze over. You should master the narrative and have every transition in your head, so that the deck just serves as a backdrop to the narrative you are offering, all of which fits together like a jigsaw puzzle. Ideally from the moment you walk in the room you have people’s attention, and they are looking at you, with their eyes locked on your eyes, and your eyes going from one VC to another, and you want to maintain this state till the end of the meeting.

VCs like investing in people who know the value of their own time. They will actually respect you more if you make it clear that you know your stuff and you are a busy person and that you will be respectful towards them and expect that they will be respectful towards you.