How do you handle inbound investor interest when you’re not raising?

Posted January 31, 2019 by Shasta Ventures

Originally published on Medium

A common question I get from founders is “How do I handle inbound investor interest when we’re not raising?” As a VC-backed founder, there’s a constant tension between building a company and building relationships with investors.

While you can always tell a VC to get lost, it’s not always the best strategy for keeping your options open in the future. This post shares a few tips for how to best respond to VCs, reasons why you may want to reconsider saying no to conversation request, and how to best leverage investor conversations.

I’ll preface this post by saying that VCs (especially associates) get a bad rep for badgering entrepreneurs with inbound interest. As someone newer to the industry, this doesn’t always feel natural. I now have much more empathy for all the SDRs that are hustling day after day to get my attention in my inbox.

Tips For How To Respond

Below are a few tips for how to respond to investor interest when you’re not raising:

  • Show appreciation. I always respect founder who are grateful for the interest and polite in their responses. Flattery also goes a long way. If you were introduced from a connection it’s always a nice touch when someone says “X thinks very highly of you.”
  • Give a time when you’ll be raising. This doesn’t need to be precise and could be as vague as “the end of next year.” Investors understand that this time will likely change, but at least you’re giving them a time when it’s appropriate to reach out again.
  • Share industry events you’ll be attending. 1:1 investor meetings are time consuming. If there are industry events (eg. SaaStr, AWS Reinvent, etc) you’ll already be attending where an investor could bump into you, mention these. If the investor wants to meet you, they’ll go out of their way to make it happen.
  • Call out portfolio competition. If it looks like the VC has a portfolio company that’s directly competitive to you, don’t be afraid to call this out. Most firms don’t invest in directly competitive companies so it’s good to have this discussion up front to prevent wasting your time.

Examples From the Archives

Below are a few examples of responses:

Reasons To Talk to VCs

There are several reasons — more than the list below — why you may want to speak to investors even if you’re not raising:

  • Learn about the competitive landscape and trends. VCs meet dozens of companies a week, whether its startups or incumbents. They’re constantly learning about your category to develop a thesis. Why not use them as an extra set of eyes to get a 20k ft view of the competitive landscape and recent trends?
  • Learn what VCs are seeing in the funding market. VCs are actively advising companies in their portfolio about fundraising. They can share perspective on what they’re seeing in the market, especially valuations (eg. “companies like yours are currently being valued at 10x ARR”) and access to capital (eg. should you raise sooner even if you’re not stretched for cash?).
  • Get tactical advice on a problem. Sharing a problem is a great way to gain new perspective and leverage what a VC’s observed at other companies. It can also be a good test for whether a VC would be a good long-term thought partner. If anything, the VC likely knows someone who’s solve the problem first hand and can connect you to that person.
  • Develop the relationship. Fundraising is like dating. Having a conversation with an investor is one more data point in learning how they think and respond to different situations, and, ultimately, whether you want to commit to a relationship with them.

So the next time an investor reaches out, I’d encourage you to think twice about how you respond and whether you could benefit from the conversation… even if you’re not raising.