Kiran On…. views and insights from the VC frontline

Former tech VC investment manager Kiran Mehta works with the Fhunded team to help identify and support Lancashire startups seeking equity funding. With over 28,000 followers, he is one of LinkedIn’s official top industry voices, and regularly posts candid observations linked to all aspects of early-stage investment.

Below is a summary of some Kiran’s recent insights based on his experience of working with founders. For more, you can follow him on LinkedIn here.

Kiran on…   asking founders if they really need to raise

I’m increasingly meeting founders who don’t need anywhere near as much investment cash as they first think. After someone walks me through their business and their pitch, one of the first questions I ask is ‘If you don’t raise, what will that mean for the business, and do you have a Plan B?’

More often than not, the founder then goes on to articulate a Plan B whereby if they don’t raise investment – or they raise significantly less – they can actually still progress the business.

But when the question posed is  ‘Do you really want to spend the next six months trying to raise a round with limited metrics, or do you instead want to go out and get funded by customers?’, there’s often a realisation that their Plan B might actually be the best Plan A.

I’m not saying this is right for every business. If you have a highly technical product, or if you’re building in a super competitive market, then fundraising might still be the best option.  All I’m saying is ask yourself the question: ‘Do I really need to raise, or am I just doing it because that’s what all the headlines are suggesting I do?’

Kiran on…  maintaining quality while growing an early-stage business

As any business scales, people think that the hardest thing is learning the new things that you didn’t know before. That isn’t easy, but it’s equally as hard to continue to do the things you used to do well – especially now you have a bigger business, and a bigger customer base.

The CEO of one of my clients said something about this that has stuck with me: ‘When we were small, we won new customers based on the service we gave, over my dead body will we start losing customers because of the service we give now we’re bigger.’

Everyone’s looking for the things they need to change. Sometimes the real beauty is having the discipline to remember to do what brought you success in the first place.

Kiran on…  how founders can count the cost of hiring too quickly 

One of the most common traps I see newly funded businesses fall into is hiring for every role mentioned in their growth plan within the first couple of weeks of the raise. I get it – the round has been a tough slog, and you’re looking forward to getting some help.

However, there’s often a big drop-off in productivity both during and immediately after any hiring spree. The recruitment process can create a major time lag across your business, and when you attempt to hire quickly, you often find that you haven’t filled every role with the calibre and quality you need.

Just because it was in your plan, doesn’t mean you need staff up overnight. In my experience, you don’t want to be growing any particular team by more than 20% in any given quarter.

Kiran on…  why embracing scepticism can lead to better business decisions

Every good leadership team I’ve worked with has one individual who is a sceptical about everything. They believe nothing, they question everything that everyone does, and they force the rest of the team to deliver reams of data and evidence before they’re convinced of anything.

They can (understandably) drive the rest of the team mad at times, but they can also be the hero of their business. This is because they are the ones who call out everyone else’s BS, and challenge everybody’s (often unfounded) assumptions about where the business is heading.

And when you get to a point where they are finally happy with a decision, 99 times out of 100 that’s because it’s the right one.

If you have this kind of person in your business, hold on to them. And if you don’t, go out a find one. You might feel they are slowing you down – but it’s better to walk to the right place than sprint to the wrong one.

For the avoidance of doubt, I’m not talking about someone that isn’t willing to change, or has a closed mindset. I’m talking about someone that’s comfortable being overruled, but only once all eventualities have been properly considered.

Kiran on…  confusing ‘investment readiness’ with ‘pitch preparation’  

One of the things I often hear from early-stage businesses is ‘We’re planning to start speaking to investors in the next few weeks. We need your help to get investment ready.’

Some founders seem to think getting ‘investment ready’ means polishing up the deck, sharpening the narrative, ramping up the outreach emails, updating some numbers, and looking at things like SEIS and EIS pre-approval.

All of that is important.

But the fundamental difference between those that raise and those that don’t  – especially in today’s market conditions – is having a tangible value proposition, and being able to articulate a clear, evidenced-based story on why your customers (and potential customers) cannot live without your solution.

If you’re looking to get investment ready in a few weeks instead of a few quarters, people like me can’t really help you (or you don’t need help, as you’ve already done the hard part).

Kiran on…  why less can be more when attending investor meetups

If you’re a founder and you go to every VC investor event in the calendar, I can almost guarantee that you will struggle to raise investment.

When I was a VC, there was quite a sizeable cohort of companies that every investor said they’d never invest in. One primary reason for this was because the founder was consistently seen at every local and regional investment event, and it often felt like their strategy was ‘spray and pray’, rather than taking a targeted approach.

As counter-intuitive as it may seem, investors also want to sniff out founders that are actually quite hard to find (the reasoning being they are probably spending most of their networking time trying impress potential customers, and not dedicating all their spare time trying to get in the same room as some VCs).

Understandably when you’re trying to build a business, it’s hard to resist hitting every investment gig that’s going. But if you want to meet investors who are realistically going to consider your pitch, you probably want to be at one or two investor meetups per month, max.

Any more than that, and investors are likely to start wondering how you have the time…

Please note, any views or comments expressed by Kiran are his personal opinions and are not necessarily shared or endorsed by Lancashire County Council. They should also not be considered as formal financial advice, and should not be used for the basis for making any commercial decisions, including any investments.