Texts with Founders: Handling inbound from investors
Avoid distractions and keep potential investors warm.
The early days of starting a company blend extreme optimism with destabilizing doubt. With so much in flux, it can feel validating when a VC reaches out and asks to meet. It can feel especially nice to hear from an investor at a well-known fund.
Inbound attention from investors happens frequently, and founders often ask me how to respond.
Here’s what I say:
I’d actively avoid talking to investors when you aren’t actively raising. It is the job of investors to constantly have meetings and look for opportunities. It’s an incredible distraction for founders, and by meeting investors one-off versus in batches, it prevents you from creating momentum. Essentially, I think it’s slightly worse than a waste of time.
I don't think investors intentionally want to waste your time by requesting a meeting. Many investors are decent people who love working with founders. That said, engaging with investors before you start your first fundraise can divert your attention from what matters—your customers and building momentum in your business.
Investors have a lot to gain from meeting you early on. It gives them a competitive edge over rival firms and unique insights into your business and sector.1 While the benefits of an early meeting are clear for them, the upside for you is dubious at best.
First impressions matter
Though many investors say they want to meet founders as early as possible, first impressions matter. I recently hosted a discussion about fundraising mistakes and how to avoid them. When the topic of investor inbound came up, a founder in the session shared his personal experience:
[Blue chip firms] reached out to chat well before I wanted to talk to investors. I ended up meeting with them because I was excited that they seemed interested.
It turned out I was not ready to talk to professional investors like that, and unfortunately, first impressions matter.
Months later, I would successfully raise a round of funding with term sheets from multiple firms. Not only did the firms I agreed to speak with early on not offer to invest, but they didn’t even reply to my emails!
Don’t worry about building relationships before you raise
The prevalent argument encouraging early meetings with investors focuses on the idea that "investors invest in lines, not dots." This metaphor, originating from a ten-year-old blog post by a prominent VC, refers to how investors prefer to observe your journey rather than a single point in time.
While an investor observing a startup’s trajectory over time can certainly help them reach conviction, that can often be accomplished over a handful of weeks and meetings during your fundraise process.
One way to build familiarity over a brief window is to share the weekly or monthly updates you’ve written so far. That enables the investor to see how you’ve progressed to date. This tactic has the added benefit of showing prospective investors how you would communicate with them on an ongoing basis if they were to get involved.
Keep investors warm and then run a process
The best way to respond to investor inbound is to be kind and firm. A simple, “Great to hear from you — we’re currently focused on customers and aren’t fundraising, but I can let you know when that changes” is usually sufficient.
When you decide to go out for your fundraise, it's best to stack meetings back-to-back and run a structured process. This approach allows you to have simultaneous conversations with multiple firms. Meeting with many investors in parallel creates momentum for your fundraising efforts. It encourages investors to get off the fence and commit.
Once you have a plan and a pipeline of prospective investors in place you can reach back out to those who had previously asked about meeting.
Focus now will help you fundraise later
The fact that many founders seek advice on responding to inbound VC inquiries is interesting. It's clear that most founders realize that engaging with investors too early may not be ideal, but they seek validation for their hesitation.
A founder friend recently messaged me about this topic:
Going from zero to one is ambiguous, and having a name brand investor reach out makes you feel validated. Hard to say no in that circumstance. But I know the game enough that I’m wary.
That’s understandable. Early days at a startup require an incredible degree of focus, and it’s easy to get distracted when investors reach out.
Stay the course, and you will be in a much better position to fundraise in the future.
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Unfortunately, some investors also reach out to diligence other deals they are evaluating or gather information for a competitor they have already funded