We were recently joined by Jomayra Herrera, a partner at Reach Capital specialising in early stage EdTech fundraising. Here are some takeaways from her chat:
What type of company is suitable for venture investment?
VC’s are mostly looking for companies with potential to grow into multibillion dollars exit opportunities within a 7 to 8 year horizon. With that vision in mind, founders should think backwards and look at their idea - is it performing on the exponential scale? Does it have software-like fundamentals and a great customer acquisition cost? Look at venture capital as if it's growth capital where getting that big influx of funds firmly places you on the trajectory of large, non-linear growth.
Finding the right VC partner
Not all partners are the same even within the same firm so it’s important to find a partner that is specific to your space and your problem point. The easiest way to do this is to see if partner investments are public and look at each one’s portfolio companies along with going through past writing and public panels to find a good fit. By reaching out to individuals interested in your space, you are more likely to get a warmer response.
How to warm up to VCs
Start by looking into angel investors because they can potentially be a great way to get going - they tend to have more time to help with pitches and can make referrals to VC investors. Another good way to get started is to reach out to investors who are writing in your space and ask if they are down to chat regardless of where you are on your raising journey – there is no harm in asking! But if you want funding, ask for funding and don’t diluted the pitch with a request to share advice.
In Jomayra’s experience the best fundraisers come from a place of personal motivation and have stories that usually illustrate a greater calling or passion – they have the ability to inspire audiences and get the greatest folks to join in. Founder’s should also be able to demonstrate that they can learn and adapt quickly and pay attention to the tiny details. However, the best fundraisers do not equal to the best companies.
Beyond founder pitches, VCs also use lots of metrics to get an indication of how successful a company could be. For example, for organisations in stages from pre-seed up to Series A with low traction - anecdotal data points, NPS, customer interviews among other factors help investors gauge how much customers are loving and sticking to the product.
What can founders ask investors other than the fund itself?
Some questions that founders could ask potential investors to see if where/what the investment could lead to:
- Tell me the time when an investment went wrong& how you reacted?
- Will you invest in the next rounds/how are you following up?
General advice for founders
Jomayra shared a lot more throughout her session, here are some small pieces of advice that particularly stuck out
- Founders should try and close small rounds quickly.
- For female founders: feel free to be more aspirational, but remain in the realm of reason.
- Cold intros are generally as good as warm intros as long as they are personalized.
- Solo founders will find it helpful to map their own traits and be self-aware of where they need support to create a more convincing pitch.
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