We just made a new series A investment. I am extremely excited about the company and will discuss it in detail once the news become public. But the reason I mention this now is that I think it demonstrates the importance of meeting investors early.
I first met the company a few months ago. The CEO was great and I found what they were doing very interesting. However, it still felt too early for us to invest. The company didn’t have real validation that the product works or that customers are willing to pay for it. The CEO told me they were about to start a few POCs with potential customers and we agreed to stay in touch in the future.
Two months later I got back in touch to check how things are going. I was surprised to see how much progress the company has made over this short time period. In only two months the company has achieved all the goals which were planned for the next few quarters. This rapid progress helped us get comfortable with the teams’ ability to execute and very quickly we decided to invest.
I often get asked when is the right time to start meeting VCs. I truly believe that the sooner the better. Many entrepreneurs make the mistake of being too secretive about their idea. But, in reality, it’s not the idea that is important but the execution. Talking to investors early can help you refine your idea, learn what else is out there, and discuss some of the potential pitfalls before you encounter them. It also helps build relationships with investors which will later assist you in selecting the right investor. As I mentioned in a previous blog post, this is one of the most important decision you will make.
The reason we like to see companies early is that it allows us to track their progress and see how they are executing against their goals. It’s the closest we can get to sitting on the board without investing money yet. There is nothing better than seeing with your own eyes how the story unfolds.
Needless to say, you want to make sure you have a story to tell. It can still have holes and missing pieces, but there must be something meaningful enough to discuss. Otherwise, you are wasting time for both sides. Also you need to keep in mind that when you meet investors early you take the risk of being exposed. If you fall way behind plan – there is no way to hide it. But I haven’t yet met a good entrepreneur whose fear of failure overcomes his confidence in his company.