Building investor relationships between rounds

Texts with Founders features tested tactics from my anonymized conversations with other founders.

For advice on dealing with investor inbound *before* you fundraise go here. Today's post is part 2 — dealing with inbound *after* a round.

I recently got a text from a well-capitalized founder friend about building investor relationships and taking meetings between rounds:

I’m trying to figure this out for myself…the building relationships between rounds thing. It’s a topic I’m quite torn on. From our previous convos you have seemed to lean towards don’t do it most of the time.

Here was my reply:

There are three options

1) talk to no investors

2) talk to select investors

3) talk to any VC who hits you up

The third option is generally just a huge waste of time. You’ll get so many tire kickers, investors trying to dig for info to funnel to potential competitors, etc.

The first option is a good default because it’s easier to be disciplined.

The middle option is fine if you are hyper picky. For instance, if [Legendary GP] at [Legendary Firm] wants to talk then you should consider it. But most founders will not keep a high enough bar here and waste a bunch of time.

At the end of the day, you usually benefit from controlling when the fundraise begins because if you get preempted by a decent but not amazing firm you are now less in control of your timeline.

Perhaps a good litmus test would be if the fund preempted you on good (but not absurdly good) terms would you feel pretty great about accepting without running a process? There’s probably only a handful of funds — and more importantly GPs — where that would be the case.

Founder friend's reply:

Talking to investors without being in the right frame of mind is mostly downside so even if you are strategic and disciplined you have to execute the meetings well or it was still a waste.

Me: Pretty much. First impressions matter.

You might also like yesterday's essay on bragging about others.