When it comes to relationships between VCs and founders, venture capitalists tend to have all the, well, capital. Founders usually need their money to keep their businesses alive, and first-time founders just beginning to enter the world of growth startups might be overwhelmed by it all — the term sheet, the pitch meetings, building connections and so on. It's hard to get your foot in the door without any prior experience, even if your product is great.
That's why Beata Klein, an associate at VC firm Creandum in Stockholm, compiled a list of her favorite Twitter threads of advice for early-stage startup founders and organized them into a thread of her own. Klein's meta thread of founder-friendly advisors is a valuable resource for first-timers who are finding their footing. Below, are the key takeaways from her picks, like Gagan Biyani of Udemy and Micah Rosenbloom at Founders Collective, among others.
Thread 1: Gagan Biyani — Co-founder of Udemy
Biyani founded educational startup Udemy, and is now building a cohort-based courses platform with Wes Kao. In his thread, Biyani stresses the importance of building a rapport with investors.
Key Takeaway: More important than proving you have a good product is proving that you are worth the money.
Biyani encourages founders to get familiar with the ins-and-outs of being a VC, stressing that their job isn’t easy and they have to “kiss a lot of frogs” to find a standout investment. On that note, Biyani said that founders tend to get too technical in their pitches, focusing on upcoming quarters or the current year, when the most forward-thinking VCs want to see you have a plan for the next decade or more. “Paint a picture of 10 years in future: how will the world be different and how will you build a $1B+ business?”
Thread 2: Romeen Sheth — Investor, formerly of McKinsey
Sheth has invested in companies like Career Karma and Atmos, and shared his analysis on the different ingredients that make a good startup pitch.
Key Takeaway: There are five major ingredients Sheth identified as crucial in any pitch deck. They are: Problem, Solution, Market, Business, and Team.
If your startup has all five of these factors, it will get funded. If it is lacking any individual area, fundraising will be much harder. A product without a problem to solve doesn’t fix any pain points. A product without a killer team can’t execute. A product without a market can’t be venture-backed, and so on. “Ultimately, the investor is betting on your ability to bring out reality in the insights around the problem, solution, market and business,” Sheth writes. “Communicate why your team is the best in the world to build the business.”
Thread 3: Joseph Flaherty — Director of content and community at Founder Collective
Like the previous thread, Flaherty places great importance on emphasizing the strengths of your team to help VCs better understand your company.
Key Takeaway: Most team slides in pitch decks are nearly identical across companies — there’s usually a photo of the team smiling and wearing merch with the company logo on it. “At the early stage of a startup when the product concept is fuzzy and revenue is non-existent, VCs are essentially backing the team above all else,” Flaherty says. “But almost all team slides are sub-optimal.”
Flaherty highlights two major ways to improve your team slide. The first is to highlight each member’s prior achievements as if you were introducing them at a conference. If a team member designed the newest Apple Podcast logo, highlight that. If they were a major player at Google, highlight that. This helps VCs understand the company’s strengths and the founders’ priorities in recruitment. The second improvement is to provide a detailed background of the “digital DNA” of the company’s key players. Flaherty says VCs will all eventually do their due diligence, so your pitch should save them the work and provide links to the platforms where you have a social media presence.
Thread 4: Yohei Nakajima — Partner at Scrum Ventures
Nakajima’s thread tosses away verbosity and gets right down to it. He’s provided 11 tips that any founder should follow to navigate their first fundraising round.
Key Takeaway: Make sure to have reference points for your progress.
Nakajima suggests creating a comprehensive tier list of VCs you would like to work with, ranking them from C to A. Your C-tier VCs are your proving grounds — this is where you’ll iron out your pitch and soak up feedback so that you’ll be fully prepared for when you reach your A-list. But just as important as investor feedback is outside feedback. Nakajima says it’s crucial to tell your story to as many family, friends and customers as possible to iron out its kinks for your presentations. It’s also helpful to have someone with more success and experience to check in with periodically and compare your milestones to.
Thread 5: Dayton Mills — co-founder and CEO of Branch
Mills is a first-time founder who struggled to find his way when it came time to raise venture capital money for his company, Branch, a virtual workspace. Through help from connections and some serendipity, he ultimately succeeded.
Key Takeaway: Money is expensive. Be careful in how much funding you take.
Mills found himself relying on a network of online friends to help him navigate the world of venture capital, and with help from figures like Sahil Lavingia, was able to generate $4 million in commitments. All that money being waved at a young, first-time founder might be tempting, but Mills closes out his thread with a warning not to take too much too early. “It felt weird turning down money. But that money is expensive. If we had taken these deals we would have diluted ourselves more than 30% in a seed round,” Mills wrote. “When choosing partners pick people who have the strongest conviction. Pick people who you can be yourself with. Pick people who will genuinely help you… They’ll be with you for life!” Branch ultimately accepted $1.5 million of the $4 million offered in its seed round.
Thread 6: Micah Rosenbloom — Investor at Founder Collective
If you’ve ever had a job interview, you know there’s always the moment at the end where the recruiter asks if you have any questions for them. That moment doesn’t happen often enough between founders and investors, Rosenbloom argues.
Key Takeaways: There are 12 key questions that founders should ask potential investors.
The questions range from financial (Do you lead rounds?) to practical (What will our reporting requirements be?). But they can all be boiled down to three key concepts Rosenbloom lays out at the end of his thread. The first is that history is better than theory; try to get concrete answers and past examples from the investors you’re speaking to. The next is to be judicious; don’t overload the VC with questions, but unfurl them over time across emails and meetings. The final is to get input from the outside; don’t just rely on the VC for feedback, and do your due diligence to learn about your investor’s reputation and history.
Thread 7: Paige Finn Doherty — Early-stage investor and Developer Success Engineer at WorkOS
Getting investors interested is one thing, and actually creating a term sheet for your deal is another. Doherty acknowledges this in her thread and gets nitty gritty, explaining each part of the dreaded term sheet and its importance
Key Takeaway: A funding jargon explainer.
Doherty’s thread contains explainers on key terms like the pay-to-play term, which incentivises investors to put money into future funding rounds, and the option pool shuffle, which Doherty characterizes as helping the investor nab more equity away while looking like they’re helping the company. In short, a first-time founder could get screwed if they don’t know what to look for. Doherty’s slides are full of warnings of how certain clauses can be abused, and how to best negotiate with investors and employees to make sure your equity doesn't get too diluted at any stage of the company’s life cycle.
Thread 8: Elizabeth Yin — Co-founder at Hustle Fund
The seed round is a major hill to climb for most first-time founders, but when they finally reach the peak they’ll see how much more there is to come. Yin’s thread lets founders know what to plan ahead for after they raise money.
Key Takeaway: While raising their seed round, a founder will have to wear a lot of hats.
They’ll have to navigate finances, product development, and investor relations. But after the money is raised, priorities have to shift towards team development. Yin states that a founder has to move away from the Individual Contributor mindset that drove their seed funding and instead move towards that of a manager, attracting top-tier talent and planting the seeds early on to ensure that the company culture grows healthily and that morale stays high.
Thread 9: Amanda Robson — Principal at Cowboy Ventures
How the hell do you run a boardroom meeting? What are the most important things to go over? How can you make sure you’re getting the most out of everyone at the table? Amanda Robson’s thread is a how-to on getting value out of board meetings and organizing them well.
Key Takeaways: Your board is an asset.
As a founder, you should look for ways to get the most out of it. Reduce wasted time by including general updates in pre-meeting materials. If someone is at the table, they’re there for a reason — call on them, even if they’re quiet and are unlikely to provide feedback on their own. In general, become familiar with the strengths of each board member. This will help you understand the assets available to your company, and help avoid “jump ball” scenarios in meetings where a responsibility is getting tossed around instead of directly assigned. As the head of the meeting, you should know who is best for each task.
Thread 10: Pietro Invernizzi — Investor at Stride
Unlike anything else in this collection of threads, Invernizzi’s advice is geared towards VCs. Pitching is stressful, he says, and VCs should do what they can to make founders feel at ease and deliver strong pitches.
Key Takeaways: There are five main things VCs should do for founders in pitch meetings.
The first is to pitch yourself and why you’d be a good fit for them before they say why they’re a good fit for you — this is their baby, after all, even if it is your money going into it. The second is to not take yourself too seriously and show respect to the founder at the other end of the table. The third is to show vulnerability — as one commenter points out, kindness is always free. The fourth is to make the pitch process a learning process. Nakajima’s thread encouraged founders to use pitch meetings as training, and VCs should do their part to participate and help with that. Give guidance to confused founders. The fifth bit of advice is to not check your phone or send emails during the meeting. You and the founder have both made time for each other, and it’s rude to be distracted during a pitch that could mean much more for them than it does for you.
These are the highlights of the insights provided in this series of threads, but each one has a deep well of replies and feedback that are required reading for any founder navigating the first steps into the world of fundraising.