How to Choose Your First VC

You've never run a company or raised money before.  Sure, you've built little projects and there was that lemonade stand when you were little, but this is for real.  Real money is showing up at your door and you're in the enviable position of getting to choose who you work with.

Even if you haven't gotten offers yet, your time is valuable and you can't pitch everyone.  You feel like you have a decent shot of successfully raising, so you want to prioritize who to pitch to first.

Here are five things you should consider when selecting which VCs to take on, and who to pitch in the first place:

1) Work with people who focus on early rounds.  Some bigger funds write lots of small checks and are great at it, others do it just as an exception.  My belief is that the more you do something, you get better at it, and you want to get known to be good at what you do the most.  If you slack on a seed deal and you rarely do seed, it's not a big deal, but to a pure seed investor, it's going to be of great importance.  The early stage comes with its own unique set of challenges, so you'll want someone who specializes on them.

2) The earlier you are, the closer you want your investors.  It's fine to have a few investors in your round who aren't local, but you should have some anchors in your own city.  In my career, I've done 19 investments in NYC and 1 in Boston, and I'll admit that I felt like I couldn't help the Boston company nearly as much.  Phone calls were no substitute for in person and when it came to hiring, my network simply wasn't as big up there as it was here.  

3) Talk to entrepreneurs they've backed before to see who really adds value.  There's a big difference in terms of impact between two investors in the same round.  Some investors really roll up their sleeves and others disappear after writing the check.  A lot of people market their value-add, but if you talk to multiple people that the investor is back, you'll get the real story.

4) Talk to investors who are decisive.  The best answer is a yes, and the second best answer is a quick no.  Your time is money, literally, and you can't afford to be messing around with someone who can't commit after tons of back and forth and meeting after meeting.  Sometimes, it's a function of process.  Single GP funds like mine or Highline run by Shana Fisher don't need to wait for a team meeting to say yes.  You're totally within your right to ask about process even in the first meeting.

5) Who helps you before a yes.  When you pitch, tell a firm how they can be helpful.  Maybe it's an intro to a customer or maybe it's helping you work through a particular issue.  Either way, I'm a big fan of givers--people who offer something before they get something back in return.  VC is a service industry and the best investors are always looking for ways to help.

6) Find someone who is willing to tell you what you need to hear or ask the tough questions.  Your first year is filled with lots of pitfalls and rabbitholes.  A great early investor shouldn't tell you want to do, but they should be willing to ask tough questions.  Sometimes, a timely, "Should we really be doing this?" can make all the difference, especially when you don't have a lot of money to waste.

7) Who can help you recruit?  Hiring great people is the most important thing you'll do early on--and you'll need all the help with that you can get.  Ask investors about how they've helped companies with their recruiting.  It's not something all investors do, but I think it should be a core skill given its importance to a company.

8) Find a lead.  Getting a round going requires someone willing to say yes before everyone else does, and risk social capital by telling others they're in.  "This could be a stupid idea, but I'm in and you should be, too!"  Lots of investors are willing to pile on, but you should start off by pitching true leads.  Ask investors for situations where they were the first yes and helped make a round happen with their intros.

9) Pick someone you can get along with.  Life's too short for assholes, and unfortunately, there are a lot of them who write checks.  

How did you pick who to pitch?  Who did you decide to take?  Did you make any mistakes?  I'd love to hear other criteria for your first round.

 

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