Each individual investor and venture fund is different in the way they like to interact during their investment evaluation. This difference is pronounced amongst angel investors and less so for institutional investors. But in either case, understanding the expected amount of time needed and the type of research to be conducted is hugely helpful to your planning and forecasting (see related article titled The Domino Effect of Fundraising). It stinks when you think you’ve got several investors lined up together only later to realize some of them were only half way through their decision process.
As mentioned previously, the two key dimensions to understand are time and research. Let’s break them down:
Some investors can make a decision in a single 1 hour meeting while others need either a lot more time or have a process that usually involves multiple meetings. This might even vary with the same investor, depending on how close to their “strike zone” the specific opportunity is.
Some investors really care about market size while others want to dive into your financial projections or a product demo. For each major aspect of your business plan you’ll find investors that care deeply about it and others that don’t care much at all. Additionally, some investors will be comfortable getting most of their information directly from the founders while other investors will want to talk to industry analysts, customers and/or your prior investors.
The key is to find out how your investor prospects go about making their investment decisions, both in terms of time and research. Here are some example questions to use:
- Which aspects of a business plan do you typically like to dive deeper into?
- What is your typical timeline and process for making investment decisions?
- How much time do you typically like to spend with a company before making an investment decision?
As for when to do this, it depends. I wouldn’t spend valuable time during a short introductory meeting asking these questions. Instead, if the intro meeting goes well, schedule a longer follow-up to get into more details. During the follow-up meeting ask the first question above towards the beginning of the meeting so that you can optimize your time on the best topics. Ask one of the time-related questions towards the end of the meeting to understand how things might play out going forward. After the meeting, write down what you learned so that you don’t accidentally mix the investors up. You’re going to meet a lot of them before closing your round.
Here’s another trick. If you want to find out how an investor goes about making investment decisions, talk to other companies they have already invested in. Just like doing a reference check on an employee prospect. And if the investor finds out you’re checking up on them, they should actually be impressed. I would.
Check out my related article titled “Getting to Closure with an Interested Investor”. And if you’re struggling to convince investors to write checks, check out these related articles: