Inside VC – Fundraising can be a full-time job
I recently spoke with Zoe Peden, Principal at Ananda Impact Ventures, to get her unbiased take to dispel some of the myths founders have about investors and help you understand what VCs are looking for and how to present your best case to them.
Zoe had a successful career as a serial entrepreneur before crossing the divide and becoming an investor. Her app, MyChoicePad, helps adults and children develop language and communication skills. It led to her being named Elle Magazine UK Female Social Entrepreneur of the Year.
Then in 2016, Zoe joined Ananda Impact Ventures to invest in late see and series A startups across a range of sectors including Future of Work, femtech, online safety, sustainability, biodiversity, and earth intelligence.
I sat down with Zoe to get her unique take on some of the fundraising questions we hear most often from founders.
What advice do you have for founders starting to look for investment?
When you decide to go down the VC path, you will be fundraising full time. This is the job. It’s not once every two years. It is all the time, and you have to get comfortable with it.
Another key part of the job is maintaining your relationships with everyone you meet along the way. Always make time to help others when they ask. When an analyst calls you because they’re conducting some research, take the time to listen and answer their questions. You never know who’s going to be reading that report and you want to make sure you’re included.
Finally, part of your job is to make sure your voice is out there. Networking can happen anywhere, and today much of it happens online. Make yourself part of the conversation with investors by connecting with investors on social media – it can be as simple as leaving comments on LinkedIn and elsewhere. People remember names, and if you’re able to engage with someone online ahead of an in-person meeting, that can go a long way. It’s a lot of effort, in addition to you working on product and sales!
You can learn how to fundraise even if you hate it now.
What proportion of companies that approach you receive investment?
We get about 1,000 people coming to us in the UK every year. We reply in some shape or form to about 250 of them. In 2020, I had 99 initial conversations with startups and then we invested in one. Many of those 99 companies were just too early because we focus on late-seed and series A. It takes time, and there will be lots of nos - you need to have a Teflon jacket to let rejection slide right off and prepare for the next meeting.
What does a founder need to do at the first meeting to be the one out of 99?
First of all, you need to listen, just like you would on any sales call. Ask them to tell you about the fund, and about other investments that they were involved in and what they liked about them. Then you adapt to what they are saying, just as you would in a sales call.
This will leave you less time to speak, but you can home in on the right message and repeat back some of the things they said during your pitch.
You should also understand the size of the fund because that will help you understand the return they are looking for. The analyst at that first meeting will be filtering the startups they meet, so you need to know who you’re talking to and not give them an excuse to filter you out.
Does the age of the fund impact the companies it invests in?
A fund usually lasts around three years. If they’re 12 months in or under, that’s good for you. At the beginning of the fund, they are more likely to take some bets and invest in wild cards. They’re a bit more free and easy and they’ll look for some early-stage startups.
After that the VC will have more of a feel for how the fund is going. They may start looking for a company in a particular sector.
If they’re at the end of the fund, they are not likely to invest in you if you’re an early-stage company because they have fewer years left to get a return on that investment.
What are the key factors you look for when making a series A investment?
Most of the time we know which sectors we’re looking to invest in, so it helps if you’re in one of those. Beyond that, we’re looking to see if the technology you have is scalable and whether it has multiple applications across many industries, not just the one you’re in now.
We look at the background of the founders. Do they have a few years of management experience in their sector? If they don’t, we want to know who they have around them who can help them get up to speed. We want to see a fully rounded team with all the C-suite in place. Everyone needs to be there for series A because when there are gaps, that’s when things start going wrong between A and B.
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