So, you’re a founder of a project with the following attributes: novel idea to an existing problem, great traction on relevant metrics, Letter of Intent(s) (LOI) signed, revenue generating, stellar founding team. Yet, after countless of pitches to Venture Capitals (VC) and hours spent refining your pitch, you still find yourself unable to convince them to get on your cap table. If this feels familiar to you, then perhaps understanding the thought process of VCs would give you a better shot at successfully fundraising.

First and foremost, all of those attributes don’t mean too much for VCs. 9.9/10 times your idea isn’t all that novel, current traction might not translate to retention and growth, LOIs are not binding, revenue generated could be a one-off, and an exceptional team is subjective. A common mindset of an investor is to be critical of a project and search for any means of negativity to counter a hopeful statistic your project has. They want to be proven wrong. Bear in mind, VCs are still accountable to their investors and should a deal go sour, those are the sorts of remarks that will be popping up in their investor meetings.

At the end of the day, let’s be clear on one thing, VCs are not just in it for that 2x – 5x gain on invested capital. They want to see 100x or at a minimum maybe 50x return. “Can this investment pay back the fund?”, “Will this project become a unicorn?”, or “Will this investment 100x by the end of the fund life?” – all these questions will be top of mind for VCs when evaluating projects. The challenge gets tougher when you understand that this 100x has to be accomplished within the duration of a VC fund life, which is typically 8 – 10 years. As such, the odds are really stacked against you to firstly prove to VCs that you can become a unicorn, but also become a unicorn in that timeframe.

Next, as a rule of thumb: never ask a VC to sign an NDA. Of course, there are always exceptions to the rule but in the vast majority of instances, NDAs are highly unnecessary and honestly, a waste of resources having to review it with a lawyer. For reference, in a typical week, a VC can review as many has 500+ projects. At any given moment, the VC is probably looking at 5 similar deals that did not require an NDA. Further, particularly in tech startups, if your code is all that unique, then it should be almost impossible (or incredibly tough) to copy it. Hence, at times, an NDA could be viewed as an overprotective strategy that would only make your project seem weaker.  It is often said that “venture capital never sleeps” and it is true to a larger extent. They have better things on their plate and creating legal issues, I can assure you, are not on it.

A final subtle tip we would like to leave you with is: get your data room in order. From our experiences, we have seen deals going through or falling apart because of how a project’s data room is presented. If you think about it, this is one of the hard pieces of evidence you’ll be providing to your potential investor to show how your team operates and functions – messy or tidy. Have everything in order and labelled correctly, or better yet, have a PDF cover page with links to all the relevant documents. This will not only get you in the good books of VCs, but also speeds up the due diligence process.

Having gained a sneak peak of a VCs thought process, we wish you all the best in your fundraising endeavors. Needless to say, these are just some generic examples we thought of that could be helpful to founders. Feel free to reach out and contact us to see how we can turbocharge your project!