Investor Outreach Blunders

If you are not an entrepreneur whose hair is on fire, most of what is written here will seem very logical and obvious. We used to think so as well, when we were living life as consultants, advising others on what to do.

However, if you are in the trenches, you probably know what we are talking about, wherein things usually get ugly in a hurry, which gives us little to no time to think, let alone act in a very structured way.

Here are things we have realized, not necessarily learnt, about raising money as first-time entrepreneurs. We are NOT writing this to advise others on what to do. We are just sharing our experience.

We believe we would have benefited from this article when we started off as entrepreneurs if we got our hands on it. For all we know, people have already written this, but we have not been lucky enough to find it.

Either way, here is the list of blunders that we have made in the past, which we now can laugh about and hopefully not repeat.

We learnt a lot as consultants, including how to think big, think out of the box, navigate organizational complexities, drive change at scale, solve problems perceived as unsolvable, among other things.

What we did not learn, was how to successfully execute these things, when we do not have deep pockets, do not have an army of decently smart people, and do not have a well-known brand.

Hence, when we started, we started with a massive consulting hangover. We were smart enough to know that mostly problems remain the same, but solutions change with time, so we did not make that mistake.

However, we messed up when we decided to build something so massive that it would take a large enterprise, with the best talent, a few years to build, and we decided we will build it in six months. 

To set context, we decided that we will build an end-to-end operating system for consulting companies to manage their day-to-day operations, including sales, fulfilment, and growth, in 6 months, with just 4 people.

We built a nice presentation with 50 slides, which by consulting standards may not seem like a lot, but by startup standards was massive. We pitched this to investors and boy did they laugh at our slides, to our surprise!

At this point, we thought that the investors we spoke to were being silly and that they were not able to comprehend the extent of our thought process. Little did we know that we were the ones being silly.

We seeded the startup ourselves and started building the product with a few early customers, who also wanted to believe that we may just be able to pull this off, given our reputation of doing such things well in the past.

It took us a few months to understand that we were trying to build a solution which was massive in terms of features but not impact it will deliver, because it did not actually solve any real pain point, it was just big.

At this point we decided to pivot to another massive solution, the details of which I will not elaborate here. But rest assured, we got investors chuckling if not laughing outrightly a few more times.

It took us a few years to understand that think big, means to think long, but start small. Pick a problem that is a massive pain point for one persona, of which there are many, the solution to which is small and practical.  

We were fortunate to work in startups that have raised investments from some of the largest and most well know venture capital firms in the world. As a result, we also got acquainted with the partners at these firms.

Naturally, when we were looking to raise money, we decided that we will only focus on the top five venture capital firms in the United States and India. A big mistake as it turned out, which we realized much later.

We were able to get meetings with the partners at these firms within a few days from when we decided to write to them. The names of our former employers were reason enough as it turns out for them to talk to us.

We pitched, they smiled, and they said it’s a bit too early for us. They told us they were very excited, they liked the space, but they want some early indicators that customers will pay for this.

In reality, what they were probably trying to tell us is they were not sure if we knew what we’re doing and that we probably will spend a lot of time and money to make mistakes to learn, but not at their cost.

Not realizing this, we moved on to the next investor, and the one after that and then some more, but the result was the same. They liked us, they liked the problem, but wanted proof of execution.

At this point, we had spoken to almost all the tier one venture capital firms and none of them were willing to invest in us as yet. Left with no choice, we decided to start talking to tier two venture capital firms.

The story here was a bit different, but the result was the same. The conversations usually started with us introducing ourselves at which point they wanted to know why we did not reach out to the larger firms.

In the spirit of honesty and transparency, we debriefed them about our conversations with the larger firms which may have triggered some alarms in their minds, especially because we had easy access at the larger firms.

A few weeks later, we spoke to one partner who was kind enough to spell it out for us. If the larger firms were not willing to bet on us, even when we had direct access to them, there must be something wrong.

It took us a few more months and many more conversations to understand that a better approach would have been to start with the smaller firms and convince them that we can onboard the larger firms at the right time.

We had zero surveillance and reconnaissance about the investors we were trying to convince, beyond what was available in the public domain. We advised our clients to do this in the past, but we forgot to do it ourselves.

We did spend sufficient time analyzing portfolios of venture capital firms and understanding their investment thesis to make an educated guess if we will be a good fit for them.

What we missed were two simple things. One, we did not actually talk to any of the startups that they invested in, to get first-hand insights about the investors and their approach to early-stage investments.

Second, we did not try to talk to analysts and associates at these venture capital firms to subtly gather intelligence about nuances in their decision-making process and inherent biases or beliefs that influence the same.

Much later we realized that it’s best to reach out to analysts and associates at venture capital firms before we talk to the partners, using our network and access so that we can put forward a more sellable story.

This realization was by accident. We were talking to one of the senior associates at one the largest and more sought-after venture capital firms globally, especially for enterprise SaaS startups.

We knew many partners at this firm, some of whom we had known for many years before becoming entrepreneurs. When we messaged one of the partners, he was in California on work.

He suggested that we talk to a senior associate from his team, who can help get the process started. Although apprehensive of the value the senior associate can add, we decided to keep an open mind and talk.

It’s only when we spoke to this senior associate did we learn that many early-stage startups from their portfolio had recently made pivots and were trying to build something similar to what we doing.

Remember, that this information is never available in the public domain as startups work on new ideas in stealth mode until they have sufficient headway to create a first-mover advantage, if the idea works.

It took us a few weeks after this meeting to realign our investor outreach strategy to also include associates and select analysts at venture capital firms to gain intelligence to craft a story that we can sell and they can buy.

We took a transactional approach with venture capital firms and reached out to them when we were looking to raise money. We did not focus on nurturing conversations with them, which may have cost us quite a bit.

Remember, as stated above, most venture capital firms did not say NO, they just said not now. The right thing to do would have been to drop a monthly update on progress and instill a sense of progress.

However, we did not bother sending even a single update email about the customers we acquired, experiments we ran, feedback we received, and the improvements that we made, in a fail fast and fail cheap model.

We are not saying that we missed building relationships with investors, which is a personal choice and we neither have strong anecdotes nor do we have strong opinions in this regard.

What we are saying is that we missed keeping them informed about all the small changes that we made in a timely manner, which when put together makes a nice and complete story.

What we did was reach out sporadically and talk about something new every single time, which to someone who does not know the journey may seem like abrupt changes which seldom inspires confidence.  

For example, one of the investors we know personally called us out on this. We were talking to him probably for the third or fourth time. The minute we entered his room, he smiled and asked if we had a new story for him.

We missed the point of his question and happily said YES, we have a new story for him and that it was based on feedback from our early customers. The discussion was very energetic as always, but with no clear outcome.

After about 45 minutes, when decided to take a small break, he asked us to explain the journey and not the current state a bit more in detail as he was unable to connect the dots from our previous meeting.

Twenty odd minutes later, he laughed and said “Good”, you guys are not idiots making random changes based on just a few data points. Curious by this statement, we told him that it’s his turn to explain in detail.

This is when he told us that he initially thought our rate of change was way too high to meaningfully take any idea to market. But once we explained the journey, it made more sense.

He spelled it out for us and told us to keep people informed of our entire journey but using a piecemeal approach and one possible way to doing that is sending a storyboarded simple email every month.

It made sense and we thanked him, but before concluding our meeting, we asked why he kept meeting us when we wasn’t able to connect the dots and started feeling that we were making random changes.

The answer he gave was probably the highlight of the week for us. To put it in simple terms, he said that we were very entertaining and always gave him new ideas to explore, but not necessarily invest.

I’m sure there are many other blunders we have made, but neither will you have the patience to read them all nor will we have the time to recollect anecdotes about all of them and write about it.

To derisk making similar blunders again, we figured out a way in which we can personalize and automate investor outreach using the Gen AI tool for personalized email campaigns that we are building for lead generation.

FYI, we raised money from one of the best investors in India a few years back. Patient capital as it turns out, which is one the most important things for an entrepreneur, to empower us to experiment and learn.

Hopefully, authoring this piece without running it by him will not be the fifth blunder we will have to write about!