A Recipe for First Meetings Between Founders and VCs

“It’s not a Pitch — it’s a Conversation”, and other mental models to help Startup Founders and VCs get off to a great start.

Sarah Cordivano and I just published a podcast on the recipe for great first meetings between startup founders and investors. I wrote this blog post to accompany the podcast: it contains similar information in a different presentation.

In my job as a VC, I meet a few hundred startup founders every year for introductory first meetings. Overall, these first meetings and their followups are 20%+ of my job, so I end up spending a lot of time thinking “let’s see how we can do this better!”. Over the years, I accumulated quite a few practical suggestions — most of them good! — on how founders and investors can make these meetings as mutually-beneficial as possible. In the podcast and this blogpost, I’ll share some of these.

Note that this blogpost is written from my own point of view, as one particular pre-seed/seed deep-tech VC. Your mileage may vary. Also, in this blogpost I mostly think about pre-scheduled first meetings over zoom, because that’s what the vast majority of my first meetings look like; but much of this will apply to in-person meetings and, to a lesser extent, to impromptu (non-pre-scheduled) meetings.

What is a First Meeting?

If you’ve seen any amount of movies about scrappy entrepreneurs, you know that the first time an investor and a startup founder meet each other is most often referred to as a pitch meeting. This misnomer is the root of a lot of the problems with how people handle these meetings. Yes, the information deck prepared by the founder is called a pitch deck; and yes, movies and TV shows depict a founder “pitching” an idea in front of a judgemental investor. But I and many of my colleagues don’t like thinking of these meetings as Pitch Meetings. A “pitch” implies that the investor is passive and mostly acts as a kind of judge: they sit there like in Shark Tank thinking, criticizing, and periodically asking a pointed question. This approach to first meetings is counterproductive to both the founders’ needs and to the investors’ needs, and it’s also a giant bummer.

In my experience the best first meetings are a conversation, not a pitch. They are discussions where both sides collaborate to achieve a shared goal (more on this below). Yes, the founder speaks more than the investor. But the investor contributes substantially, sharing things they know about the world which might be relevant to the founder, and collaborating with the founder to discover where they agree or differ in their assumptions about reality and about the future.

The Goals of the First Meeting

To take a step back: during a 1-hour first meeting, the investor and founder have about 60 minutes to figure out whether they’re a good match and how else they can be relevant for one another. So they try to achieve quite a lot in 60 minutes. As an investor, my goals in this first meeting are:

1. Find out whether my fund should invest
2. Make this meeting worth the founder’s time
3. (to a lesser extent) Expand my understanding of the world, and find some flaws in my model of the world and my thinking

For the founder, their goals are usually:

1. Progress their funding round: collaboratively with the investor, figure out whether the startup is a fit with the investor’s fund
2. Progress their funding round, by learning about other investors who could be a good fit (more on this later)
3. Get some feedback and insight on their startup and mission
4. Get any other kind of help with their startup

It’s worth talking a bit about the investor’s goal #2: “Make this meeting worth the founder’s time”. This is incredibly important. My fund, Lunar Ventures, typically invests in less than 2% of the startups we’ve had a first meeting with. If I was simply meeting 50 founders, listening to them passively, and then telling 49 of them “thank you but we won’t invest”, that would be a shocking waste of founders’ valuable time. My goal in these first meetings is to make the founders’ 60 minutes they spend with me worth their while regardless of whether we invest, by trying to help the founder pursue their four goals above, not only goal #1. To do that, I deliberately work on making the meeting valuable for goals #1–4. I actively look for steps I can take which will be easy for me but helpful to the founder. More on this below.

Making an efficient conversation

So, we know a good first meeting is not a pitch but a conversation. What does this practically mean? How can the founder and the investor make the most of the 60 minutes they have together? Here are some ideas:

1. Keep answers short. Founders should strive to keep their answers as short as possible. The investor can always ask for more detail. Keeping answers short will allow the conversation to cover the most ground. The information gap between founders and Investors causes investors to often ask somewhat-wrong questions: giving them a short answer enables them to course-correct fast. Founders should tell investors when it seems they’re asking the wrong question — this is where investors learn the most.
   Investors should strive to ask questions that elicit a short answer. Yes/no questions are optimal, when possible. Founders should aim to answer yes/no questions by a short yes or no. The most important thing is to avoid long, meandering answers (or long meandering questions! Offenders — you know who you are!) Providing short answers with high information density is a superpower.
   Founders (and everyone else!) are encouraged to take some time before answering a question, to consider what the best answer is. This is always a sign of strength. Founders should strive to give one answer to a question: if you have three answers, take a bit of time, choose the best one, and say “here is the best answer, I have a few others if you want”.
2. Interrupting is good. Investors and founders should interrupt each other often, to make sure the conversation is on track. First calls are full of misunderstandings. Leave excessive politeness at the door, embrace efficiency, and respectfully interrupt when the other person seems to have gone off-track. Both parties should leave pauses and spaces to be interrupted to make this as frictionless as possible.
3. Not every comment requires a response. Sometimes investors offer feedback, insight or pushback that they think might add a different perspective. Good communicators might even say “hey, here’s an idea you may want to think about offline”. These comments don’t always require an answer. “I’m going to take that advice and reflect on it offline” is a perfectly acceptable response. Even if you think the investor is wrong, try to ask yourself (or them), “is trying to come to an agreement on this the best use of our time right now?”.
4. More people in a meeting is not better. Make sure it’s clear why everyone from your side is attending the meeting. If you have three people on the call but one of them is speaking 90%+ of the time, the investor will ask themselves “is this really the best way to spend this person’s time?” and “does this indicate a culture problem?”. If the goal is for these team members to join and get some perspective or exposure to the investment process, then you should probably make this explicit.
   Personally, if I should meet multiple team members, I usually prefer to meet them separately — my goal is to be careful with founder time, and having multiple 1:1 meetings allows me to have more targeted conversations and learn more without spending extra founder time. (Other investors might have a different preference.)

When I think of how to best conduct first meetings, I go back to the computer science topic of Communication Complexity¹. In Communication Complexity, Alice and Bob each have an input, and they try to compute together a function on both their inputs, using the least amount of communication. In our metaphor, Alice would be the founder, and Bob would be the investor. Alice’s input is the information on her startup, and Bob’s input is information on his VC and his perspective on the world. And they are trying to get in the fastest way possible to the answer to the question “will Bob offer to invest in Alice?”. A general principle of Communication Complexity is that the more communication rounds Alice and Bob engage in, the faster Alice and Bob will get to an answer. In my experience, the metaphor carries perfectly to investment meetings: the shorter the questions and answers are, the more back-and-forths the investor and founder will manage to do in 60 minutes, the quicker they will get to an answer and the more accurate that answer will be.

From Jason Adam Katzenstein, New Yorker

How can VCs help founders in a first meeting

Above I said that my goal as an investor is to make the first meeting worth the founder’s time regardless of whether my fund invests. Let’s take a minute to appreciate how preposterous this is: I have my first meeting with a founder. I’ve never met them in my life and I’m at a stark information disadvantage. They’ve spent 1000x+ more time than me on their startup; they’ve thought in depth about their sector, clients, and product. I, on the other hand, am clueless. I spend my days thinking of hundreds of startups in dozens of different sectors, but not in particular about their startup. Yet I’m here claiming that in the span of a 60-minute meeting I might manage to not just progress an investment process with my fund, but actually help them with the startup in other ways.² Me and what army?! How can I possibly tell the founder something new that they didn’t yet consider? Well, it turns out this is not only possible but common, because I do have one secret weapon: situational awareness. Let me explain:

As I mentioned, I spend my days thinking about hundreds of startups in dozens of different sectors. In VCs’ jobs, we gain a very wide knowledge of the tech world at large: its stakeholders, and the patterns and incentives that govern it. This provides me with situational awareness of a kind that founders seldom have. I learn about thousands of businesses a year, and my job is to make educated guesses about the future of technology markets. I can’t possibly know more than the founder about their own business, but I do usually know more than the founder about the future position of their business inside of the world of technology at large.³

When I try to provide useful insight to founders in first meetings, I try to apply my situational awareness in order to analyze their current and future opportunities and challenges vis-a-vis parts of the tech world that they have not yet encountered. I try to point out patterns that caused companies in adjacent sectors to fail or succeed, and which might be relevant here. This is stuff I think about all day anyway since it’s useful towards forming our investment decisions. When I interact with founders, I try to apply this situational awareness in a way that’s both explicit and conversational. I try to figure out the future trajectory of the founders’ plans inside the tech landscape. My goal is to give founders new ideas they might not have had before, and also to learn how the founders’ thinking may differ from mine in ways that teach me their insights on their own sector. Sometimes I will learn my ideas were entirely wrong, because I’m missing something vital about the founder’s sector, which the founders can point out because good founders often come from the future.

The thoughts I share with founders are far from 100% accurate — in fact they are often wrong. My goal is not to be right 100% of the time about the founder’s startup and its trajectory — this is indeed a preposterous goal. My goal is rather to offer a pushback, an opportunity or an idea, which the founder has not heard before, and that has a decent chance (say 30%+) of being right or simply useful. I offer these to the founder, and leave it to the founder to decide which, if any, to incorporate into their thinking.

In this type of first meeting, the investor and founder both speak and bat ideas at one another, creating something similar to a “marketplace of ideas”, or an iterative process aimed at arriving closer to some objective truth. The VC and the founder are in fact gathering information through an iterative process, and at the end of the meeting, hopefully both of them have had a chance to learn something new, as well as to evaluate their mutual fit.

Preparing for the First Meeting

To have an efficient and successful first meeting, both sides need to prepare. The founder should think about:

1. what information they expect the investor to learn (and internalize) in advance about their startup before their meeting.
2. what information they can provide the investor before their meeting that would be helpful (but not expected) for the investor to review.

The founder should send the information in #1 and #2 proactively to the investor. #1 will often come in the shape of a deck, and #2 might be part of the main deck, or a separate document. Note that the deck sent before a first meeting should not have any information that is very confidential: all of that can be left to a later time. The founder should consider that the investor is a person learning about their startup for the first time, and that learning is much better done offline by the investor, rather than “live” in a presentation by the founder and hoping that the investor is great at thinking on their feet. Sending information to the investor in advance helps investors come prepared and “properly primed” for the first meeting, to use founders’ time most effectively, to give answers faster, and in general to provide the best service to founders.

Note that materials for investors are needed here. Don’t just assume that a VC who reads the website probably knows what you’re doing. A website is usually directed at potential clients and hires, and is just not the right vehicle of information to prime a VC to properly understand your startup.

Providing information in advance is important for some non-intuitive reasons: VCs meet hundreds of startups a year, and thus VCs know the generic archetypes of startups in each field. But they don’t know your startup! Without preparing, the VC will “fall back” on their default mental models, and will think of your startup as a generic startup. This is almost always bad: your startup is likely unique in multiple ways — it’s very hard to succeed doing something that’s “cookie cutter”. But an investor who has not prepared in advance will often fail to grasp the nuances of your startup and how you think of things differently, because they are too preoccupied with “thinking on their feet”.

Worse yet, the founder will often not know that this misunderstanding is even happening. The founder is so used to their startup’s unique points, they forget what’s unique about them, and will fail to notice that the investor is missing the point. Founders who have worked on their startup for thousands of hours tend to have a bad theory of mind about the VCs they meet that only spend 20 minutes thinking about their particular startup. The most reliable way to shake investors from the cookie cutter formulas is to give them homework in advance and, ideally, to point out the aspects of the startup that are unique or contrarian.

Of course, the matching expectation is that VCs must actually do their homework: they should review the deck and materials, understand what is unique about this startup, think about this in advance and have time to digest and decide what questions they want to ask in order to understand the startup best and drive an investment decision as fast as possible. If supplementary materials were provided, the investor should take the questions most important to them, and pursue more information on those in the supplementary materials. (Effective founders often organize the supplementary materials in a thematic way that encourages and supports this “directed” way of learning by investors.) Experienced VCs are often pretty good at reading decks and getting to the parts that are most relevant to them. If the materials are good, in just 10–20 minutes of prep they can know a lot about a startup even before the first meeting starts. This is the bedrock of a great first meeting.

This advice also goes both ways: the investor should give the founder in advance information that helps them understand what kind of investor they are, how they can contribute to the startup in terms of funding and other help, and supply the other information that founders need in order to pick the best investor for their startup. (I won’t expand on this here, but here is a good blog post on the topic, and a few others.)

In summary, I recommend that founders have a “information package” consisting of a non-confidential deck and supplementary materials, which they send to investors ahead of a first meeting. It’s even better if this deck is a very-non-confidential teaser deck that can be freely forwarded on to other investors — this can make fundraising much easier by having investors do your lead-generation for you. Founders help facilitate this by providing materials that can be forwarded onwards and welcoming them to do so. This is an important opportunity that deserves some explanation, see below.

Even if the VC doesn’t invest, they can be a great matchmaker

The startup investment market is incredibly inefficient, especially at the pre-seed stage. Compare it to the stock market: in the stock market all investors know the identities of all stock they can buy, have information about the underlying companies, and can buy and sell them at relative ease, at a publicly-publicized price. The startup investment market is exactly the opposite: investors and startups don’t know of each other, don’t have almost any information about each other before they meet, and have little way to predict the financial terms in advance. There are some platforms like Angelist which make the market slightly more efficient, but overall this problem is largely unsolved. It’s a real tragedy that one of the most important and leverage-producing economic activities in our society is run in such an inefficient way. But — founders and VCs can take some steps to make the market more efficient:

Many founders don’t realize that investors can be great matchmakers: we typically know hundreds of other investors, and can try to connect to the most appropriate ones. At Lunar, we try to invest only when we are very good investors for that specific startup, where we truly understand what the founder is doing and can really add value. Often we’ll find ourselves saying “this is a great startup and a great team, but we’re not a good match”. We’ll often have a good idea about who the right VCs are. The most efficient thing we can do is to send those VCs a heads-up saying “hey, here’s a startup that might be a great match for you”. Founders can promote this activity by literally preparing the information pack (non-confidential teaser deck and short blurb) and sharing it with the VCs they talk to, telling them “feel free to forward this to other investors who you think are a good match”. This will increase the chances the founder finds the right VC for them, but it also allows the startup investment market to become more efficient, which is an important goal in itself.

VCs love getting these reach outs from one another because investors typically best know what each other are looking for. When I send such a tip to another investor who is appropriate, I get a warm feeling of being a good citizen and making the whole market more efficient. And in return, I will get tips from other investors about startups that are right for me but not for them. Some founders think that it’s a bad signal for VCs to be sending each other a note saying “we passed on investing in this startup but maybe it’s for you”. But this is only a bad signal if done very poorly. More often, VCs don’t read much into each other’s decisions, and will take this as a useful sharing of information, rather than any kind of objective opinion on the startup itself. (Also, I won’t send other investors startups that I think are objectively a bad investment. So if anything, my sending a startup to a colleague is a statement of a positive opinion, not a negative one.)

Zoom: a flawed venue for meetings

One of the main challenges we face in creating the optimal first meeting is the inherent limitations of Zoom calls. Unfortunately, they simply do not support the type of engaged and active conversations that are possible in person. VC by now is a global business, and it’s not feasible to conduct all first meetings face-to-face, as much as we’d like. More often than not, the VC that’s the perfect match for your startup won’t be located in your city. Therefore, we all should try to be good at Zoom meetings, and at the same time recognize their inherent limitations. And once the investment process gets into its later stages, it’s a good idea for one of the sides to hop on a plane and go meet in person — meeting face to face is irreplaceable.

Final thoughts

My aim in writing this blog and recording the podcast is to invite founders and VCs to be more deliberate about the way we conduct first meetings. The banal format — a pitch session where the VC plays a passive role — is outdated and inefficient. I’m advocating for investors and founders to promote a much more interactive and conversational format, with both sides actively inquiring, exploring and making connections. This requires much more preparation from the VC, and more flexibility and improvisation from the founder, but I believe this serves both sides much better. Following the first meeting, the focus should be on how the VC can bring value to the startup by progressing the investment process, but also by making further introductions, regardless of whether it’s the right match.

VCs spend hundreds of hours a year, and thousands across their career, in first meetings. It is therefore incumbent on them to professionalize in this. VCs should deliberately practice to direct the meeting such that by the end of the first meeting, both the founder and the VC will have found that the time they spent was valuable, leaving the interaction with a sense of positive engagement, and feeling that — regardless of the result of the investment process — the sixty minutes were well invested.

Acknowledgements. I’d like to thank Sarah Cordivano for her help in writing this. Thank you to Vache Asatryan for many conversations that inspired some of this podcast. Thank you to my partners, and especially to Lawrence Lundy-Bryan who is one of the best interviewers I ever met, for letting me learn from them how to uncover hidden truths. And most of all, thank you to the thousands of founders I’ve spoken with over the years, and the dozens I regularly work with, for putting up with me interrupting their experience with my confidence.

Footnotes.

[1] Communication Complexity is a theoretical topic in Computer Science, invented by possibly the greatest living computer scientist, Andrew Yao. It’s an abstract theoretical topic, but its lessons and patterns of thinking often generalize to a lot of real-world domains, from computer communication to Economics, Machine Learning and as you see here, human collaboration.

[2] One way to help a founder is to draw on my network in order to introduce them to other investors or operators they should talk to, or to provide some other resources. This is quite situational and often difficult to do in a first meeting when I and the founder don’t know each other well yet, and there’s no recipe here. In this article I mostly focus on information I can give to startup founders which could help them.

[3] This is especially true in the field I invest in most frequently, dev tools and computer science tooling. This field is made of many interconnected products and systems, so situational awareness is even more important there than in other fields.