What To Do When Investors Call Your Startup

Feb 13, 2013

At some point or another in your startup’s life…the financiers of the startup world (otherwise known as venture capitalists) will start to call you.  Sometimes they’ll email you.  At first, it’s really exciting.  Almost a “Omigod, someone noticed me!”.  But it’s actually not as exciting as it sounds. 

Alot of times, you’re advised to just ignore them.  But I know how it is, it’s the entrepreneur in us.  We’re curious people.  We can’t help but want to look at every possible opportunity that comes our way. 

Here’s why you should ignore it, when not to ignore it, and what to do when the VC’s or investors call your startup:

When the VC Calls Begin

Typically the VC begins his/her hunt around the end of August/early September.  Because their kids are returning to school, and they’re getting back to work, off vacations, etc.  Most of their high time is in the fall, and then again in the Spring.  At least that’s when the majority of the phone calls start to come in.

Are They Even a VC at All?

Probably not.  99 times out of 100.  We just call them VC’s because they represent a firm, and they don’t disclose who they are.  Whether they are actually a PARTNER, an intern, or a scout is a completely different story.  Alot of times it’s just the venture capital firms’ interns calling so they look busy.  They read a script.  Often you’ll hear them typing in the background.  They can actually be a lot of fun to mess with though, like telemarketers.  Definitely an entertaining distraction from your day.

Why They Don’t Invest In You

It can be the most frustrating thing in the world when they contact you, waste your time, then don’t respond or invest in you.  They don’t invest in you because you don’t meet their criteria.  You don’t meet their criteria, because they didn’t do their homework on your startup before contacting you. 

“I’m sorry…you’re criteria is 15MM in annual sales…and you’re calling me why again?”  Or “do I look like a public company to you?” are sentences I’ve repeated like a broken record.

The Real Deal & How to Spot It

From what I know of speaking with other entrepreneurs, when the real deal contacts you…you probably don’t know they’re the real deal.  Real deals (good one’s that is) are pretty sneaky, because they’ve done it for so long.  They usually watch you from afar for years.  They won’t contact you, at least not often.  They probably won’t even invest in you with that business.    So if you do actually get contacted by a real partner or real investor, he probably has already made up his mind about you.

But even more of a possibility, is the VC or investor probably doesn’t even notice you exist at all.  They have plenty of deal flow coming in from all over the community.

Ask About the Firm’s Personality

Real investors & partners also have “personalities”  (think different strokes for different folks) They look for specific companies with traits that match their themes.  If someone is contacting you, and you don’t match their area of expertise or investment preferences….they probably aren’t a real investor.  It should be an immediate red flag.

Vetting the Scout or Intern

The simplest way to vet on the fly during a VC’s scout or intern call is to ask them what their firms criteria or investment theme is.  Never waste your money flying to meet them or going by their office if they don’t answer that question.  If you have to pay for a flight, talk to the partner first.  You have more important things to be doing, like building a company for one. 

When In Doubt

When in doubt, ask other entrepreneurs.  I’ve seen situations with friends where interns/scouts schedule meetings between entrepreneurs and partners, and the partners never show up…because they had no clue the scout/intern even scheduled the meeting; nor did they want to meet because the company did not match their investment theme.  Nor are the scouts really “connected” to the partners.