You Asked, We Answered with Vanessa Larco

These answers have been edited for concision and clarity.

How does a founder stand out? 

In the world we you don’t have serendipitous moments where you run into someone at dinner and they’re like, “Meet my friend who started a company,” the only channel I have is email intros or LinkedIn. So I would say my inbox has exploded. And so we’re all trying to figure out how to reorganize ourselves to figure out who to respond to  because unfortunately now that’s ballooned to this volume, you can’t actually respond to everyone. Before the pandemic, I’d try to respond to every email I got but now I would just never finish. It’s impossible.

So how do you stand out? In a world where every investor is getting bombarded with email and LinkedIn, warm intros do go a very long way if you can. But I would be very targeted about the investors you reach out to. So make sure it’s an investor that hasn’t invested in your competitor. Figure out the investor who has some level of familiarity with your product, if it’s consumer, or something with kids, maybe a parent would be a good place to start. I would be targeted. 

In your email I would explain why you chose that investor. The stuff I respond to is “Vanessa, I’ve seen you invest in X and Y, I think those 2 or 3 companies would be good customers of mine.” So if you’re in a B2B, the best thing you can do is be like, “I can give you a great customer for this SaaS tool I built and I think you’d benefit because of XYZ” and immediately I’m like, “Well great!  I can go ask them if they would use this and if they think it’s great, I’m going to want to dig in.” 

That takes a lot of time, you obviously can’t email 500 investors with a very well researched intro but if you pick the right ten, fifteen, you should get some response and if it’s really done, hopefully you’ll get a meeting and get to pitch. But yes, make sure it’s highly personalized, and increase your odds by making sure it’s someone who has interest and could make the investment. 

What does it mean to be a female founder raising capital and what does it mean to be a female founder on the investment side of things?

There was a generation of women in venture before my cohort which I would say is the 2016-ish cohort. There was a whole generation of women before that I think really paved the way for us so it was infinitely easier to be in venture when I joined than it was before me. I do think that with each cohort of women that really trailblaze it makes it easier for future generations. So I would say I came in and I was pretty fortunate. 

As a founder trying to raise money, I do think it’s harder. A few things. One, as I mentioned, my interests drive a lot of the things I invest in. I’m interested in things that are very different from my male colleagues and that’s normal. Like I am right now really interested in menopause because I’ll get there one day and the solutions don’t really look particularly exciting. My male colleagues on the other hand are like “Menopause? What’s wrong with what we’ve got?”

I do think that having more diverse investors means more diverse interests so there’s more ability to fundraise if you’re in these other categories that may not appeal to your standard white male. But I think we’ve come a long way since I’ve been exposed to the venture world so I think there’s more people for you to reach out to that can align with your interests or your company. 

What are some mistakes that entrepreneurs make that can kill the deal?

Not knowing how much money you want to raise or why you want to raise that money from venture. I know that sounds really trivial but you gotta start there. There’s some amazing companies and I’ll ask the founder, “You’re breaking even,” or “You could be break even and be profitable soon. Why are you taking venture money? Why wouldn’t you just own this thing and bootstrap and own 100% of your company?” And if there’s no good answer to that, that’s alarming. 

I get that everyone is starting to think that venture is the only path but it isn’t, there are so many other ways to finance your business. So you have to be really thoughtful on why you want to go with venture funding because one, it’s not easy to get venture funding, and two, once you’ve taken venture funding it locks you into a path. It locks you into a path where we expect you to grow at a certain rate and if you don’t want to grow at that rate and if you don’t want to grow at that rate you’re going to have a really pissed off board. And so you want to make sure that the expectations are aligned. 

So you gotta understand why you want venture money, and then how much are you raising? I would say 30% of the entrepreneurs I meet with are like, “I don’t know, I’m raising anywhere between two and eight.” And I’m like, “What? What do you mean by two and eight? Two million and eight million? That’s a huge difference!” And we expect very different things in a company that’s raising two million dollars and a company that’s expecting to raise eight million dollars. So you kinda gotta pick a number. 

The way you pick that number is that one, it has to be correlated to how far you are. If you have an actual product, it’s very hard to raise eight million bucks. But if you’re just starting off and you have a prototype or you have a few things, maybe you just raise 500k so you can build the initial product and then you raise 2 million so that you can launch the product and acquire users and test things out and once you have users and you have data, then I think you’ve earned the right to raise a Series A which can be six to eight million. And if there’s a lot of demand, maybe it inches up to ten. 

But you’ve got to realize there’s milestones to the amount that you’re raising and the more risk, the less money that people want to put towards that risk. And then the more you prove, the less risky it gets and the more money you can attract. So there’s a supply and demand and you’ve got to figure out where that curve is for your business. 

And when we ask what you’re going to use the money for and I would say the biggest faux pas is marketing. I’m going to spend eight million dollars on Facebook ads. And I’m like, “That’s scary.” Or like, my salary. That rarely happens, but I’ve had that happen once. So you have to be very clear about how long that money is going to last, where you’re going to put that money and how you’re going to prove out that money. 

Because every fundraiser, every round is to prove out something, to cross something off the list, to cross one of the risks off the list and say that we’ve accomplished that or that we’ve answered that question. Now we need money to answer the next question. And now we need money to answer the question after that.

What does it mean to be a Series A and a Series B investor and what are you looking for from founders?

Every stage has a lot of risk, it’s just very different. I gravitate towards Series A’s and early Series B’s because it’s a lot about the product and the team and it’s a lot less about investment banking spreadsheets which is the later stage stuff. And the seed and pre-seed I don’t feel as comfortable in because there’s no product for me to mess with and there’s no user data for me to sift through to see if it really delivers on the promise. So I feel most comfortable at the A and I feel like I can help companies at the A build out their team and build out their hypothesis, look at their data and try to make sense of it. 

When you’re going in for a series A, a lot of investors will say “We want to see your revenue,” or “We want to see your CAC, Customer Acquisition Cost, your LTV (Loan-to-Value) ratio,” there’s all these metrics that people want to see. But I think that’s a little lazy. What I like to do is.. Let’s say, “What problem are you trying to solve?” and then “How are you solving that problem?” and that has to be crisp. It’s gotta be really clear. You have to have a unique opinion about why you think you’ve built this thing that solves this problem in the best way possible. At the end of the day, I just want to know that people love the thing you’ve built. So, you can use dozens of different metrics to prove that but that’s really what I want you to prove at this stage. 

And then it’s the team. It’s really the team. There’s a bit of experience and storytelling and you’ve got to be inspired. You have to see a future that’s really, I wouldn’t say different, but you have to have a north star, big vision for your company of where you are going to end up one day. But be very realistic about where you are today and all the steps you want to do in the near-term. 

And then there’s chemistry. Because we are going to be working together for a very long time. And we are going to agree and disagree and we just gotta have a really good working relationship and that’s one of the hardest things to assess over zoom.