190. A VC’s Job Is Not To Write Checks

VC Minute
A VC's job is to say "no." Now knowing that, how do you adjust your approach?

VC Minute – quick advice to help startup founders fundraise better

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A VC’s primary job is not actually to make investments.

Most people hear that. immediately argue that their minds are blown. Of course, their job is to write checks! That’s what they set companies up to do. It’s the way they get LPs. It’s to write checks and invest in companies.

But when you look at their day-to-day activity and what they do more than anything else, it is not writing checks. It’s saying “no.”

And that’s really important because pretty much every piece of advice you’ve got about your pitch deck has either come from a VC or an accelerator that is basically a VC.

What they are optimizing for is as much information as possible in a deck so that they can find a reason to say no. And it’s not because they’re heartless. It’s not because they’re cold and mean or whatever else. It’s because the average investor will see 1,000 decks for every check that they write.

They can’t do 1,000 meaningful due diligence processes in order to write one check? No way! They can maybe do 50. So what do they do with the other 950? They find a reason to say no that lets them sleep at night.

“Oh, this founder doesn’t have a technical co-founder? All right, they’re gone. Don’t need to see the rest of the slide deck. This founder doesn’t seem to have a large enough TAM. All right, they’re gone. This founder says their TAM is ludicrously big. Nope. They’re gone too.”

Any reason that you can say no and feel like that was a rational choice enables you as an investor to continue doing your job and weeding out companies because you can’t test every single thesis. You can’t validate every hypothesis. You can’t talk to every founder.

I’m actually a huge believer; don’t send a deck at all. Don’t send a deck and give them any opportunities to say no based on the information. I recognize we live in a world where decks are important.

But I do believe in a teaser deck that doesn’t necessarily have 12 slides. Should have five slides or six slides. It obviously needs a team. And then all you need to do is paint a huge market opportunity.

The phrase that I live by is “unexpected and inevitable.”

You’re looking for some piece of information about the world that the investor didn’t know and, more than likely, can’t know. Because if they do know how disruptive that idea can even be,

You want to show up in front of an investor and say, Here’s this thing about the world that I’m uniquely and singularly aware of. And once the investor hears that information, everything else just follows. To the point that the absolute best possible reaction from a VC is, “Wait a second, wait a second, wait a second. So what you’re saying is because there’s this change in the world, then this follows, then this follows, and there’s a huge fucking market there.”

And the reaction is, yeah, baby. That’s the pitch you want to talk about for how we’re going to get there.

That should be, the fundamental component of a teaser deck is the team, that unexpected yet inevitable market opportunity, and then ideally some traction or whatever last little bit of information that you can give.

The goal is not to give an investor a reason to say no. It’s to give them a compelling idea that they simply cannot say no to before they have a conversation.

About Eric Marcoullier
Eric coaches first- and second-time tech CEOs, keeping their companies alive long enough to get lucky, figure out their business, find product/market fit and replace his ass with someone who knows how to scale companies beyond $5M in ARR. His work primarily involves challenging business assumptions, providing frameworks for new situations and distilling complexity down to basic, actionable ideas. If you’d like to learn more about his coaching, visit www.marcoullier.com or www.linkedin.com/in/bpm140

About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)

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