Tuesday, May 26, 2015

How Not to Pitch to a Startup

Several months ago, Infinity Box, our company, and thus Wufoo were listed in a publication targeted at investors, angels and venture capital firms as a promising young startup. We have, unfortunately, not been able to track down the source of this recommendation (investors seem odd about keeping their sources mysterious), but what followed for us has been a series of emails and phone calls over the last few months that have come from associates of various VC firms.

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Now, our funding situation is that we took some initial seed money ($ 18,000) from Y Combinator and then followed that up with a small angel round ($ 100,000) to get us to launch. That’s all the money we’ve taken and that was all done within the first 4 months of 2006. Since then, we’ve been blessed to have Wufoo do very well out there and we’ve been able to grow our team, product, user base and profits solely off of the service’s revenues. We did not take VC money because 1) we like control and shares and 2) we just weren’t interested in getting big fast, which meant VC money seemed like overkill to us in regards to our plans for growth. So when these calls started coming in, our stance was (and still is) that we’re not interested in seeking additional funding, but we’d be happy to talk because, well, you never know.

Of course, before every one of these phone calls, we would look up the firm’s web site, we would read their history, we would look at their portfolio, we would look up the associate that we’re going to talk to (there’s always a photo and there’s always a bio) and we would even look up some of the companies their firm had invested in. If the associate we’re going to talk to had a Facebook, Twitter or Linkedin page, we would look at that too. We think of it as basic research and it’s just how we do things. It’s how we write the articles on this blog and it’s how we make all of the decisions in our company. We’re like boy scouts. We like being prepared.

Additionally, we think it’s a basic form of courtesy to show someone else a level of concerted interest, if they’re showing interest in us. This way, hopefully, time would not be wasted on posturing and excessive introductions. Unfortunately, it’s become very clear to us after every one of these exchanges (there are no exceptions I’m afraid) that these investors and associates do not do the same. All of the associates we talk to seem to have three goals in mind when they contact us:

  1. To put us into a database of companies their firm is aggregating. From what we understand, most VC firms send out an army of these associates to just gather basic research on companies, but for some reason, their flavor of choice for data collection is via a phone call rather than actually using the Internet to scrape most of the mundane stuff that they’re asking us. We’ve actually had conversations where we can hear them typing into a spreadsheet in the background as we talked to them.

  2. To regurgitate the firm’s history and mission statement from their web site. We noticed this early on and that’s why we started going over them ahead of time so we could skip it, but apparently this information must always be passed on orally to a potential company regardless of whether the company is able to finish their sentences.

  3. To let us know that they were different, that they give more than just money and that we should keep them in mind when we do decide to take on more funding. Needless to say, we find it very odd (if not funny) to hear every firm state how different they were in exactly the same way as everyone else.

Obviously, we are not against gathering research. We are not against unsolicited introductions. And we actually think the intention of the act—to start an earnest conversation or relationship with a company that appears promising is a great idea. We’d love that. But the execution of these exchanges completely baffle us. Every associate asks us the same surface questions that can easily be answered by reading a few short pages on our web site (specifically our FAQ and our About pages—they are definitely not hard to find). In fact, we’ve actually had people call us with promises of expertise and advice that’s never even created an account with Wufoo or know how we made money (that we have a freemium software-as-a-service subscription model).

Now, we understand that the typical relationship regarding a startup and a VC firm is to have the startup pitch to the VC. It is the startup’s job if they want money to convince the VC that they are worthy of investment. We also understand that the associate that’s calling us is making like a million of these calls a day. It’s probably just a job to them. We get that. We do.

However, if it’s the VC firm that initiated an unsolicited conversation and the company indicated ahead of time that it wasn’t interested in more money, and the VC firm insisted on talking anyway…well, then it’s sort of not cool to not do your homework and effectively make the company do the pitch anyway. Then we’re doing your job. Then, when you show the company how not different you are from everyone else following what is apparently the same lead, you’ve accomplished the exact opposite of what you intended: We do not think you’re different. We are not confident in your ability to establish strong relationships with companies. And we will probably not think of you when we need funding later on.

I know. That’s really harsh stuff. In fact, I’m unfortunately notorious for being rough on venture capitalists during meetings when we were based in Silicon Valley. Which is why 1) I’m not allowed to sit across from potential investors during lunch/dinner meetings so they can’t see the reactions on my face and 2) Chris, Ryan and I rotate returning these calls to VC inquiries. And so, thankfully, it’s not just me. We all feel surprised, which means these firms are probably giving the same impression to countless other companies.

What we find surprising is how every single one of these associates miss the opportunity to be a hero—to truly make an impression. Because, honestly, it’s so bad out there, that it would probably take very little to actually impress us even a little bit. All you would have to do is indicate to us that you’ve at least read the marketing materials on our web site (the thing that you want to pump money into) and tried out our service (the thing that’s potentially going to make you more money).

At least then, you’d be in a decent position to have a conversation that has give and take—maybe even provide criticism that we might find valuable. And that would be the event that would have me write down your name. The moment someone tells me, a person that’s been thinking obsessively about how to improve my company 24/7 for the last 3 years, something insightful about my business, product or future that I haven’t thought of before would be awesome. Also, bonus points would probably be given to the investor that calls us with knowledge of any of the number of articles we’ve labored over for this blog.

Anyway, the take away from all this for venture capital firms is that we’re not really complaining. I mean, technically that’s all I’ve been doing, but I also want you to know that we are definitely honored to be in a position to have VCs that want our attention. We know that’s a rare position to be in and we don’t take it lightly. Which is why we’re actually rooting for you. For that hero associate out there to get a hold of us and maybe knock our socks off with a little insight or even just some good ol’ fashioned genuine enthusiasm. For good reasons, we don’t want our time wasted. And we really do want you to accomplish your goals, which is to be remembered. You don’t have to be our biggest fan. We don’t expect that at this point, but we do think that if you’re asking us to consider handing over a percentage of our soul (a soul that we’ve cultivated with our own blood, sweat and tea rs) in the hopes of capitalizing on our now apparent successful trajectory, then we’d hope that you’ll at least do us the honor of reading our words and learning our craft.

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