In this Endeavor Fireside Chat, Endeavor Entrepreneur and Founder of Boatsetter Jackie Baumgarten met with Sanket Parekh, Partner at Secocha Ventures, to discuss everything about investor relations. From early-stage advice like targeting the right investors, to late-stage guidance on how to evolve your pitch over time, the experience shared between Baumgarten and Parekh is transformational.
Baumgarten- “Early on, when there isn’t a lot of data yet, investors are investing in you as a person. It’s about vision and storytelling at this stage.”
Pitch Meetings and Introductions
- Know your business so well that you are not tied to a pitch deck or a script.
- Baumgarten urges founders to pick their meetings carefully and to match the investor to the stage of profitability their company is in. Seed, angel, growth, and venture investors all have different prioritizations, so aligning yourself with the right type of investors to meet with is key.
- “You need to know your business inside and out”. Depending on the growth stage, founders need to provide metrics on how their product fits its market and how they are reducing risk in that space. The conversation will mature as the relationship between the founder and investor grows.
- In those initial cold outreaches, you’ll want to control the narrative. Baumgarten learned firsthand that entrepreneurs should avoid sending their pitch decks before the meeting to avoid creating investor doubt. Entrepreneurs should be the ones to introduce and address all aspects of their business models, good or bad.
- Ask a lot of questions. Baumgarten mentions that she has learned to ask critical questions as early as possible. Entrepreneurs can ask about an investor’s investing history, their goals, where their fund is in its lifecycle, etc. If the big things don’t align, you can save everyone the pitch meeting.
Parekh- “First-time founders are so focused on winning investors over that they forget to ask if this is a good partnership to begin with.”
- Investor relations begin with multiple conversations, starting way before the big pitch meeting. You want to first leave an impression, a bite, of your vision. Then reveal more and more as the conversations move forward. Don’t give up everything immediately.
- Parekh reminds the audience that, like anything else, there are good and bad investors. Being on the same wavelength is more valuable than the extra capital.
- Founders may not appreciate it, but investors go through the pitch process too. Parekh explains that getting his fund vested is a similar process to what founders go through when pitching. Entrepreneurs should understand there is usually a lot of empathy regarding pitches.
- The “spray and pray” approach to targeting investors leads to a lot of the misconceptions of intense scrutiny that exist during pitch meetings. In Parekh’s experience, there is much more room for open-mindedness when founders are very selective with whom they take meetings.
- For the cold approaches, Parekh recommends doing research beforehand. Cold calls should give thoughtful reasoning why the targeted fund is particularly well suited for the founder’s business.
After the Pitch Meeting
Baumgarten- “Investors almost never explicitly say no. One of the things I wish someone had told me earlier is when to identify a no as a no.”
- Baumgarten urges tying up loose ends whenever and as fast as possible. Entrepreneurs shouldn’t leave a conversation with something open-ended. If you find yourself forced to leave something open, then be sure to resolve it quickly with a follow-up. Align on the next steps and avoid confusion.
- First-time founders tend to focus too much on valuation, when really, it’s secondary to their understanding with investors. Entrepreneurs may find themselves with their choice of investor after rounds. Baumgarten is adamant that choosing the investor that aligns with your vision will always be the correct choice over more funds.
Parekh- “Post-meeting etiquette is very important to us.”
- Without a follow-up, an investor will begin to question the engagement level of the founder post-investment. If investors aren’t confident in your ability to keep them in the loop after the check clears, then you aren’t likely to make it to that stage at all.
- The biggest thing that can push Parekh’s fund to invest is understanding the industry environment. Parekh warns founders to tread lightly when approaching an investor who operates outside of the founder’s industry. If they are going to approach an investor outside of the industry, then do so slowly and with a lot of research.
Maintaining the Relationship
Baumgarten- “I don’t think it can be overstated just how much time goes into [managing expectations].”
- Tapping into investors for guidance outside of the normal cadence of communication can be very valuable— not just for the additional guidance they might offer, but also in building relationships. Baumgarten has even reached out to investors for feedback on ideas. “They love the interaction, and they offer valuable advice more often than not”.
- Baumgarten stresses the amount of time and effort necessary to correctly build relations with investors during investing rounds. She wants prospective founders to know that maintaining relationships with their investors can be a frustratingly time-consuming process, but a necessary one that they should be prepared for.
Parekh- “A pet-peeve for us is when founders start to get busy, and they stop communicating with us.”
- Feedback goes past initial meetings. Keeping up with regular updates, Parekh recommends monthly, goes a long way in keeping the relationship strong.
- According to Parekh, it’s all about honesty. He notes that there is pressure to force things into working past the investing round, when that is not always possible. Investors face the harsh reality of entrepreneurial failure daily, so avoiding the hard conversations won’t fool anyone. Try to avoid this pressure and be honest. It actually breeds more confidence if entrepreneurs are open about their challenges.
- Investors do their own due diligence. “We are looking to get to know the person”, Parekh says. Founders should be willing to be vulnerable with investors.
Jackie Baumgarten and Sanket Parekh represent decades of experience on both sides of the complicated relationship between investor and entrepreneur. Their conversation served as an exploration into the ins and outs that they have learned through their years. If you’d like to hear the full conversation where they covered additional topics not mentioned in this article, you can check out the original video here.
This Endeavor Masterclass Recap was written by Endeavor Staff member Marcos Rosler.