TBC: How Do I handle Inbound Interest From VCs?

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Welcome to another episode of the back channel and today's episode. I'm going to dig into my mailbag and take out a question that I got sent to me from a frantic founder over Twitter DMS. This founder was nervous because he had received an unsolicited email and unsolicited outreach from a VC who. I heard what he was doing solid.

He was doing online and wanted a meeting. This founder is like, I'm not sure what to do now. I want to raise capital, but I don't know if I should talk to them. I've heard different things. What do you think? Jason? I told him I have a lot of thoughts on this and proceeded to sketch out a few ideas that would help direct him. And I thought to myself, I should share this with the rest of the community, with the [00:01:00] rest of the listeners. So here are my thoughts. When a VC reaches out to you. They are doing their job.

They are trying to track down deal flow before they're ready to raise and trying to establish connections. This is your opportunity to create a relationship in a much more casual way, a low pressure way. So the first thing I want you to do is make sure that as you're communicating with this investor, even if they happen to catch you at a time where you're like, oh my God, it would be amazing to raise capital.

What you don't want to do is pivot to that interest and be like, yes, I'd love to talk. I'd love to raise capital because what you've done is created a single stream process without competitive dynamics, without pressure signals, which means that this VC is going to all of a sudden be evaluating you on an island. And that can send a lot of signals around whether or not this is an interesting deal, whether or not other people might be interested in it. So when this unsolicited interest comes inbound, you want to make sure that you [00:02:00] give off. The vibe that you're not fundraising. Right. You're you're flattered by the interest. Um, you think they're great. But you're not fundraising. You'd still like to keep in touch with them. You'd still like to say hi and maybe establish a relationship, but you're not fundraising.

And so one of the things that you do in an instance where you're quote unquote, not fundraising. Is that you don't jump on the first slot that they offer. Can we talk tomorrow or whatever? You give it some space and you find a time that works for you. You're not in a rush here. So you get a chance to say something like. You know, not really fundraising right now. Really, really focused on executing.

I do like to carve out time for calls like this. Uh, every other week, something like that, that also indicates by the way, oh, calls like this. Other investors have reached out before this person is in control of his time. He understands what's important. Shows a lot of confidence in what you're doing. [00:03:00]

So that's the first thing. The second thing is make sure that when you're taking these calls, you realize you're not pitching them because you're not fundraising. What does that mean? Well, that means that as the call is going on, it doesn't have to run like a pitch meeting. It can be like a call with any other random friend that you met. Do you just got introduced to Jason?

Yay. You say hi, Jason. Great to meet you for the first time. Where are you? You get a chance to ask questions about them. Personally. You get a chance to ask questions about their firm. What they're looking at. They can respond casually, ask you about what you're doing. You don't have to roll into pitch mode. The great thing is that in this situation, You have carte blanche, you have, uh, get out of jail, free card for whatever something comes up that you either can't answer don't want to answer or just don't have the materials for. So, if they say would love to walk through a deck, you say. I don't have a deck.

I'm not fundraising. Maybe not that aggressively, but you just say, [00:04:00] I actually don't have a deck. We're not fundraising yet. So. There's nothing to walk through.

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[00:05:00] Uh, if you're talking through certain things, you get a chance to go. Uh, this is something I'm really excited about. Uh, something we're working on.

If they ask for more details or like rather not share that right now, definitely we'll share that when we're going out to fundraise. These are all. Totally. Okay. Things to do in these meetings that are not fundraising meetings. They're not pitch meetings. Okay. Now other questions that come up is. How do I know of a VC is worth my time. Well, you can do a couple of things.

You can do some quick diligence on them via the old Googles or now chat, GBT. See if they are a firm that you've heard of before that people respect. See if there are a firm that actually invest in your stage, it's really important to [00:06:00] understand, like, is this a much later stage from in which case you can meet them, but you don't have to really spend a lot of time with them because it's not going to be anything for right now. or is there, is there. Bad, um, reputation. Surrounding this from these are all good things to understand, as you go into thinking about. Whether or not, you're going to take a meeting and how you'll take the meeting. And then lastly, this kind of goes back to one of the comments.

I said, this founder who originally emailed me was like, ah, like I don't have a deck. What do I need? Do I need my financials? What do I need to prepare? Let me say this again. You don't need to prepare any. Any materials, especially for this first meeting, because you're not fundraising now. One thing to call out about the idea of not fundraising is you could not be fundraising today. And be fundraising next week. That is completely okay.

And, uh, is not a lie. You're not fundraising right now. You could transition to fundraising next week. I wouldn't. Recommend that that's actually the timing that would [00:07:00] take place. But if you're having some kind of cognitive dissonance around the fact that you're like, well, I really like to fundraise and I might fundraise soon. Don't worry about it.

You can just not be fundraising when you talk to them. And when you're ready to go out and fundraise. You can reach back out to them. You can get re introduced to them and say, Hey. Um, I'm glad that we got a chance to talk so recently. We actually were able to get a bunch of our materials together. A lot of other VCs started showing interest.

So I think we actually are going to go out and fundraise. Had a really good time in our initial conversation would love to set up time. Um, during our week of first meetings, if you'd like to take a look at the deal. So. That's my quick answer in this mailbag edition to the back channel, to what to do when a VC reaches out with inbound interest. Hope that's helpful for you. As you start getting lots of interest in what you're doing at your company and helps you execute a great fundraiser in the future. All right, that's it for now. I will see you on the next episode of the back channel.

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