20 VC 036 The Pitching Process From Email to Term Sheet with Stephan von Perger @ Wellington Partners



In episode 35 of the 20 minutes VC, host Terry Stebbings interviews Stefan von Perger, an early-stage VC at Wellington Partners, who shares his journey from working at McKinsey to venturing into startups with Citymapper and Stylistpick.com, and eventually transitioning into venture capital. Stefan emphasizes the importance of startups having a clear growth strategy and the ability to articulate why they are seeking funding, as VCs look to finance different phases of growth. He advises founders on the best practices for engaging with VCs, such as leveraging networks for introductions, tailoring communication, and being proactive in follow-ups. Stefan also discusses the value VCs add beyond capital, like sharing industry best practices and making strategic connections. Additionally, he highlights the significance of transparency and excitement from both parties in the investment process.

Summary Notes

Introduction to Stefan von Perger and Venture Capital Discussion

  • Stefan von Perger is an early stage VC at Wellington Partners.
  • He has a background in technology, having studied computer science at university.
  • Stefan worked at McKinsey in consulting, specifically in the technology sector.
  • Transitioned from consulting to startups, working at Stylistpick.com and Citymapper.
  • Stefan's journey reflects the broader trend of interest in tech startups and entrepreneurship over traditional careers like banking or consulting.

"Stefan is an early stage VC at Wellington Partners where he identifies investment opportunities and builds relationships with great entrepreneurs."

This quote introduces Stefan von Perger and his role at Wellington Partners, highlighting his focus on identifying investment opportunities and building relationships with entrepreneurs.

"I started sort of getting excited about technology when I was at uni studying computer science, and then I did what most people do after university back in 2009, and I went to work in McKinsey in consulting."

Stefan von Perger discusses his initial interest in technology during his university years and his subsequent career path into consulting with McKinsey, indicating a common trajectory for computer science graduates at the time.

Stefan's Transition to Startups and Venture Capital

  • Stefan was drawn to tech startups and high-growth businesses after his experience in consulting.
  • His work at an e-commerce company and Citymapper led him to the venture capital industry.
  • The shift in career aspirations among students from traditional roles to entrepreneurship is noted as a positive change.
  • Stefan finds it exciting to have experienced different roles within the tech ecosystem.

"I actually sort of wanted to do an MBA, got kind of pulled into a startup, and then got really excited about working in this e-commerce company called Stylistpick.com, and then from there moved to Citymapper, and then from there again, quite randomly moved into VC."

Stefan describes his unplanned but fulfilling journey from considering an MBA to being involved in startups and eventually transitioning into venture capital.

"I think there's really exciting parts of being in the different roles in the system."

This quote highlights Stefan's appreciation for the diverse experiences and perspectives gained from working in different roles within the startup and VC ecosystem.

Venture Funding and Startup Growth

  • Raising venture capital should be driven by the desire to build a high-growth company.
  • Startups should aim to grow faster than what would be possible organically by reinvesting profits.
  • VCs assess the phase of growth they are financing and whether the funding sought aligns with the needs of that phase.
  • The goal is to understand the startup's next milestones and evaluate if they are achievable post-investment.

"I think if you want to raise external money, then you need to have this appetite for building a high growth company, which you try to grow faster than it could naturally and organically, just by reinvesting your profits."

Stefan von Perger explains that the primary reason for seeking venture funding is to accelerate growth beyond what could be achieved through organic profits alone.

"We try to understand what sort of phase of growth we are financing."

This quote emphasizes the VC's approach to evaluating the stage of a startup's development and determining the appropriateness of the funding amount for that particular phase.

Raising Money and Conveying Purpose

  • Founders often have a preconceived notion that they need to raise money, which can lead to ineffective communication with investors.
  • It's crucial for founders to clearly convey why they are raising money to avoid misunderstandings with potential investors.

"A lot of people come with this preconceived idea that they want to raise money, and it then often becomes a weird situation when they go and talk to investors because they don't do a great job in conveying why they're raising money."

Stefan von Perger discusses a common issue where founders are fixated on the idea of raising funds without being able to articulate a clear purpose, leading to potential communication issues with investors.

Investment Rounds and Preferences

  • Investors often look for companies that can raise multiple rounds of funding, not just an initial seed round.
  • Later stage investments may focus on expansion into new markets or improving monetization strategies.
  • Seed and Series A rounds are preferred for early-stage investment opportunities.

Because ultimately most of these high growth businesses will not just take a seed round and then be finished with that.

This quote highlights the expectation that successful high-growth businesses will require multiple funding rounds beyond the seed stage to reach their full potential.

So for us, we're looking for seed round and sort of series A rounds...

Stefan von Perger expresses a preference for investing in the early stages of a company's fundraising cycle, which includes seed and Series A rounds.

Raising Funds and Strategic Planning

  • Clarity on current position and goals with raised funds is crucial for founders.
  • Raising funds when not in dire need can be advantageous.
  • Impressions of not needing money but having a clear plan for its use can attract investors.

I think it's really important to define clearly where you are right now as a founder and where you want to get with the money.

Stefan von Perger emphasizes the importance of founders having a clear understanding of their current position and future goals when raising funds.

It's best to raise money when you don't actually need it.

This quote suggests that the best time to raise money is when a company is not in a desperate financial situation, as it may lead to better terms and more interest from investors.

Financial Management and Capital Allocation

  • Money should be allocated to generate the highest return for the company.
  • Stockpiling funds without clear purpose may not be seen as an effective strategy.
  • Raising more funds than needed, under favorable conditions, can be a strategic move.

We think that if you have money in the bank, you should allocate it to the place where it can generate the most return for your company.

Stefan von Perger advises against stockpiling money and instead advocates for its strategic allocation to areas that will yield the greatest return for the company.

You should raise while you can raise, because there's always a time where you can't.

This quote reflects the practical approach of securing funds when the opportunity arises, as future fundraising conditions may be less favorable.

Connecting with Venture Capitalists (VCs)

  • Reaching out to the right people, such as initial investors or angel investors, is crucial for connecting with VCs.
  • Leveraging networks, including LinkedIn and university contacts, can help first-time founders find potential investors.
  • A warm introduction from a trusted contact can significantly improve the chances of securing a meeting with a VC.

It's all about reaching out to the right people.

Stefan von Perger highlights the importance of networking and getting introductions from credible sources within the investment community to connect with VCs.

Potentially I would try to avoid sending a completely open email to an investor.

This advice from Stefan von Perger suggests that cold emailing investors is not the preferred approach and that founders should seek a warm introduction.

Investor Communication and Meeting Preparation

  • Avoid blanket emailing investors; personalized communication is more effective.
  • Providing a concise and compelling overview of the business can be beneficial.
  • Making it clear why you want to talk to a specific investor can increase interest.

What I would try to do is find someone to send that email for you and giving this person really good ammunition to get the investor excited.

Stefan von Perger recommends having a mutual contact introduce the founder to the investor, armed with compelling information about the business.

Make it really clear why you want to talk to a particular investor.

Personalizing the approach to an investor by referencing their work and expressing a desire to learn from their experience can make the outreach more effective.

Expectations for Initial VC Meetings

  • Investors may expect a brief presentation, such as a ten-slide PDF, outlining the business.
  • Founders should be prepared to share information that will be forwarded to others.
  • Specific documentation requirements for initial meetings can vary.

What you expect a ten slide PDF? Do we need cap sheet? Do we need a financial breakdown? Financial forecast?

While the transcript does not provide Stefan von Perger's response, Terry Stebbings asks about the expected documentation for a first meeting with a VC, indicating the importance of being well-prepared.

Crafting an Effective Pitch

  • The ideal pitch document is a 10-page PDF that excites investors.
  • Founders should bring a detailed presentation to meetings, but focus on storytelling.
  • Emphasizing passion and personal connection to the business problem is critical.
  • Creating a friendly atmosphere is key since VC is a people business.

"When I go to a meeting, as a founder, I would probably have something between ten and 25 pages with me to explain all the important aspects of the business, but not necessarily look at every slide during the 1 hour meeting."

This quote underscores the importance of being prepared with a comprehensive presentation but focusing on the narrative rather than going through each slide in detail during the meeting.

Maximizing VC Meetings

  • Founders should take advantage of any introductions offered by investors.
  • Understanding the investor's vision and what they seek in a startup is important.
  • Demonstrating attentiveness to feedback and questions from the first meeting is advantageous.

"I always recommend people to really follow up on that and not let any offer for an introduction to a potential customer or potential portfolio company, et cetera, slip away."

Stefan von Perger advises founders to actively pursue any introductions offered by investors, highlighting the importance of leveraging such opportunities.

Value-Added Services by VCs

  • VCs offer connections across various levels of seniority and industries.
  • Sharing best practices and experiences from the VC's portfolio is valuable.
  • Helping founders make timely, informed decisions is a crucial service.

"I think it also goes about sharing best practice in the portfolio, and it can mean just really helping founders do the right thing at the right time."

Stefan von Perger describes the role of VCs in providing guidance and sharing experiences that help founders navigate their startup journey effectively.

Assessing Market Size

  • No market is too small; founders should consider adjacent opportunities.
  • Realistic market assessment is more important than showing a large market size.
  • Founders should be honest about the addressable portion of the market.

"I think being clear and being honest to yourself, when you estimate a market is actually more important than showing that it's huge."

This quote emphasizes the importance of a realistic and honest assessment of the market size, rather than inflating it to appear larger.

Post-Meeting Follow-Ups

  • Gentle nudges are acceptable for following up with VCs.
  • Understanding that VCs manage multiple projects helps set expectations for response times.
  • Persistence is necessary, but it should be balanced and respectful.

"It's totally okay to follow up once or twice."

Stefan von Perger reassures founders that following up with investors is acceptable, suggesting a balanced approach to persistence.

Follow-up Communication with Investors

  • Effective follow-up communication with investors is crucial to rekindle their interest.
  • Mentioning success stories and recent positive developments can make investors reconsider.
  • Providing updates gives investors more reasons to get excited about the venture again.

"I would include success stories. So, by the way, we've signed three more clients. We've had a real good new hire..."

This quote emphasizes the importance of sharing recent achievements with potential investors to showcase momentum and growth, which could reignite their interest.

Investor's Due Diligence Process

  • The due diligence process can be prolonged due to ongoing internal conversations and feedback from portfolio companies.
  • Founders can aid this process by providing information that helps investors advocate for them in internal discussions.

"And so if the founder in their follow up emails give me more ammunition to kind of present the case again in our internal meetings, the easier it becomes."

This quote suggests that additional information from founders can be valuable in helping investors make a stronger case for the startup during internal deliberations.

Rejecting Startup Pitches

  • Transparency is key when declining investment opportunities after several meetings.
  • The level of personalized feedback may depend on the depth of interaction with the startup.
  • A lack of excitement within the investment team is often a deciding factor for not investing.

"But nobody is extremely excited about it. And I think you don't want sort of to marry an investor that isn't super excited about what you're doing."

The quote conveys the idea that both startups and investors should seek a mutual level of excitement and commitment, which is a crucial factor in investment decisions.

Quick Fire Round: Key Factors in a Pitch

  • Investors like to see concrete traction and achievements rather than just projections.
  • The traction slide is often the focal point to assess what the startup has actually accomplished.

"I'm usually scrolling to the traction or achievement sort of slide because I want to see what the team has actually built."

This quote highlights the investor's preference for tangible results, such as customer reach and product development, over mere future projections in a company pitch.

Personal Connection in Initial Outreach

  • Personalized initial contact that references an investor's past experiences can be compelling.
  • Entrepreneurs who seek specific advice based on the investor's background may stand out.

"I think what personally I like the most is when people really refer to something that I've done in the past."

The quote indicates that personalizing outreach by acknowledging an investor's previous work and seeking relevant advice can create a meaningful connection and increase the likelihood of a response.

Decision Factors for Recent Investments

  • The recent investment in Onfido was influenced by the strong team and the potential in the on-demand economy.
  • Onfido's role as an enabler of trust in the sharing economy was a key factor in the investment decision.

"We liked their team a lot... But we also got really excited because of the immense opportunity in the on demand economy..."

This quote reveals the rationale behind the recent investment, focusing on both the strength of the founding team and the market opportunity they are addressing.

Show Closure and Resources

  • The host thanks the guest for participating and directs listeners to additional resources.
  • The episode concludes with an invitation to check out the guest's articles and to tune into future episodes.

"Now for all the resources mentioned in today's show and for the links back to Stefan's articles on medium, please head on over to www.thetwentyminutevc.com..."

This quote serves as a closing remark, providing listeners with directions to access further content related to the podcast and the guest's insights.

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