Today we cover Part 2 of The Fast No with Mike Collett of Promus Ventures. In this segment we address:
- Do you approach evaluation like a funnel process and what specific methods do you use to accelerate decision-making?
- Do you see investors that operate w/ a trigger… where they make a commitment but it doesn’t trigger until a certain amount of capital has been raised?
- If I’m an entrepreneur, is there anything I can do upfront to target fast-response investors and avoid slow no investors?
- Turning the tables, have you ever had an entrepreneur drag things out before committing that you’d get an you an allocation?
- Any other pieces of advice or watch-outs you’d suggest to either entrepreneurs or investors w/regards to the topic?
1- Early Conversations w/ Down-Stream Investors
Mike mentioned how the best founding teams are having conversations w/ the A & B investors while they’re at the seed stage. Strong Series A investors want to track the startup, look at the data and get a better sense for the founding team. And this can also signal to the Seed investors that the founders are thoughtful about the partners they want to work with once they get to an A. We’ve talked previously on the episodes w/ Peter Wilkins and Semil Shah about the importance of the post-seed plan and path to series A… but today’s interview showed that there’s a strong opportunity to cultivate these relationships even prior to the closing of a seed investment.
In the interview Mike cited preparedness as having the most impact on time-to-close. When the investor has done their homework on the startup and the founders have done their homework on both their materials and on the investors they’re meeting with, negotiation will move along much more quickly and the likelihood of financing increases. When investors speak w/ a very prepared founding team, this signals a level of commitment, thoughtfulness and founder-market fit. Does the team have the data room ready? How well have they’ve built the startup’s foundation legally? And how responsive is the team w/ questions and meeting requests? These discussions can move as fast as 2, 3, or 4 weeks when the startup is prepared and has the data room ready.
Mike had some great advice w/regards to communication. His first point here had to do w/ entrepreneurs avoiding investors that drag out the process. His suggestion was for founders to speak with other founders that have worked with the investors. And the portfolio companies can give insight, not only on speed to decision but also on how they’ve been as a partner through the entire process. The other key point on communication was to get out of email. Whether one is negotiating, or delivering a decision, it’s not hard to pick up the phone and talk through the thought process. Ultimately this is still a relationship business and real relationships are not built over email.