Dear SaaStr: How Early Should a Company Approach Venture Capitalists?

Dear SaaStr: How Early Should a Company Approach Venture Capitalists?

There are basically two seemingly very different approaches you’ll hear:

• As early as you can, to build a relationship. Mark Suster summarizes how to effectively build relationships with VCs well before you need or want funding from them here in this classic post: Invest in Lines, Not Dots – Both Sides of the Table

or

• Only when you are actually fundraising. Trying to get a meeting too early, or just for “coffee,” often doesn’t work. VCs meet with 100s or even 1000s of startups a year and if you aren’t raising, there often isn’t time to meet. No VC has time to build relationships, even just with the founders they’ve already met … not really.

Personally, I don’t have time for coffee and prefer to meet right when you are ready to raise. If you are taking “pre-meetings” or “meeting VCs ahead of a raise later this year” or anything like that, personally, I don’t have time to meet now. Let’s meet later when you are ready to raise.

But … and yet … many of my investments in founders I’ve already met and gotten to know over time. 🙂 And getting to know founders earlier dramatically de-risks the people side of an investment. You get time to really know the CEO. As time has gone on, I worry more about not having enough time to get to know the CEO before investing, and less about the details of cell D55 in the operating plan.

So the real answer is I think, as early as you can get a meeting the VC really wants to take. Each investor is different. If you have a little bit of traction, some decent metrics, then try to meet a VC up to 6 months before you need money. That will give them time to track you.  Especially these days, when everything is harder.  Especially Series A or later.

But sometimes, you just aren’t “there” 6 months ahead of time. If you are pre-revenue and the VC only invests post-revenue, often it’s hard to get a meeting early. Personally, I just don’t want to meet or even look at a deck that is pre-revenue, or where there isn’t any real growth yet.  More on those criteria here.

So try to get the early meeting. But if you can’t, don’t give up. Go back in a quarter or two, and share your progress.

(note: an updated SaaStr Classic post)