Okay, you have decided to raise venture money. You have had a few meetings with a VC, presented to some partners, and you are in the pre-termsheet pipeline with a venture firm that you’re interested in. Okay, but that is a much more perilous place than most entrepreneurs understand, so here are four questions you need to get answered right away:
- Do I have a strong advocate? You need to know who wants your deal done. While you think it may be the partner you initially met with, it may not be them. It may be someone else who is pushing that partner to keep bringing you in, or it may be no-one at all, other than your persistence. You need someone. Further, you need to know that they really, really like you. It isn’t enough that they’re going through the process of bringing you by. They have to like you and be selling you to the partnership. If they’re not, you’re dead.
- Do I have any strong opponents? You need to know who in the firm’s partnership — or associates! — doesn’t like the deal. A few adamant opponents can get a deal killed much more easily, in most firms, than can a single strong advocate get a deal done. So ask the question: Is there anyone here strongly opposed to this deal? How can I help get them past their concerns?
- What other unrelated deals is the firm currently doing? Assuming they’re not looking at a competitive deal, your real issue is one of context: How busy is the firm? If they are in the middle of closing five other deals, yours may very easily fall off the table just because of time and resources to close. If that seems possible, ask whether you would be better off delaying until they have more time to deal with your transaction. If that doesn’t seem possible, take it as a soft “no” and move on.
- Have I answered all the questions? Don’t assume you have answered all the questions that have been asked of you. Ask. And then ask again: Have I answered all the questions you folks have? Keep doing that. You’d be amazed how often people give up asking questions and kill a deal just because they’re tired of feeling like they’re asking the same questions.