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

Stephan von Perger is an Early Stage VC at Wellington Partners where his primary role is identifying investment opportunities and building lasting relationships with the entrepreneurs behind these companies. Stephan started his career at McKinsey before moving to Stylistpick.com as Head of Operations, he then progressed to setup and run the business operations at CityMapper.com. In today's interview Stephan walks us through the pitching process from the first email to signing the term sheet! In Today's Episode You Will Learn: How and why Stephan made his move from the world of startups to the venture industry? What are the right reasons for a founder to enter a round of venture funding? How should founders go about meeting and connecting with VCs? What can founders actively do to position themselves well and how should founders phrase their emails and communication? Are there any aspects or buzzwords in emails which instantly make VCs interested? What documentation is required for the initial meeting? Is there anything founders must bring? How can founders make the most out of their meeting with VCs? Are there any questions founders should ask? How should founders respond to a question they do not know the answer to? What happens if a VC says they will contact you but a week later the founder has heard nothing? What should the founder do? We then finish todays episode with a quick fire round where we hear Stephan's thoughts on which pitch or communication has impressed him the most, what single thing Stephan most looks for in founders and his most recent investment and why he said yes?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  You're listening to episode 35 of the 20 Minute VC with your host Harry Stebbings. Now, I'm so excited to have Stephan von Perga on the show today to discuss the journey for fundraising for startups and how they should interact with VCs. Stefan is an early-stage VC at Wellington Partners, where he identifies investment opportunities and builds relationships with great entrepreneurs. Prior to Wellington, Stefan set up the business and operations side at Citymapper and was head of operations at Stylistpick.com. It's an incredible interview where Stefan breaks down how founders should interact with VCs into a series of actionable tips. So, without further ado, here's Stefan.

• 0:48Speaker 01

  You have now arrived at your destination.

• 0:51Harry Stebbings?

  Stefan, welcome to the 20 Minute VC. It's an absolute pleasure to have you on the show.

• 0:55Speaker 02

  Hi, Harry. Good to speak to you today. Looking forward to a good conversation.

• 1:00Harry Stebbings?

  Can you stop by telling us how you got into the venture industry and give us a little background on yourself?

• 1:06Speaker 02

  Sure. So, 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 and Consulting.

• 1:22Harry Stebbings?

  Okay.

• 1:23Speaker 02

  And I worked in the technology part of it. So, that was interesting, but it was quite far away from, you know, what I'm excited about these days, which is tech startups and high-growth businesses. And I actually sort of, you know, wanted to do an MBA, got kind of pulled into a startup, and then got really excited about working in this ecommerce company called Stylistpick a couple of years ago. And then from there, I moved to Citymapper. And then from there, again, quite randomly, moved into VC. But it's been such an amazing journey to be part of this sort of wave of technology, startup excitement that has, I think, come through, you know, sort of the system in

• 2:08Speaker 02

  the last couple of years. And yeah, it's really exciting also when I now go and speak to students that are probably, you know, when I was a student, everybody would have said, "I want to be a banker and I want to be a consultant." And nowadays, a lot of them say, "Hey, I want to set up a business." And I think that's really exciting.

• 2:25Harry Stebbings?

  And when you're at Citymapper, what was it about being a VC that attracted you?

• 2:30Speaker 02

  Um, I think the, um, there's really exciting parts of being in a different role in the system. Um, when I was at Citymapper and we were raising a big round with Paul O'Leary, um, it was, you know, very exciting to be part of that on the, on the company side. Um, but personally, I find it exciting to see the different viewpoints over time. And so, um, when the opportunity came along to join the investment side, um, I was, you know, keen to jump on that train and see where it takes me. But, you know, that doesn't mean I want to be an investor for the rest of my life, I think. You know, um, having worked in startups, in a large one and a small one, and now working in a VC, I think, you know, there's always this kind of urge to maybe go back, um, on the operational side

• 3:15Speaker 02

  and maybe set up something by myself. So we'll see.

• 3:18Harry Stebbings?

  Now, you recently wrote an article on Medium titled Twenty Nine Early Stage Fundraising Pitfalls. So in today's episode, I was hoping to flip that on its head and discuss not what not to do, but what to do for a startup entering a round of funding. So let's start from the beginning. Uh, for all founders thinking of raising VC funds, what are the right reasons to enter into a round of venture funding?

• 3:43Speaker 02

  I think that's a really good question, and I think, you know, a lot of people come with this preconceived idea that they want to raise money and, you know, it then often becomes a weird situation when, um, when they go and talk to investors because they don't do a great job in, you know, con- conveying why they're raising money. Personally, I think, you know, 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, and just by reinvesting your profits. And the way we look at it, um, when someone wants to raise money

• 4:24Speaker 02

  is that we try to understand what sort of phase of growth we are financing. And if you're talking to a really early-stage company, um, that has basically maybe a prototype and a few better users. Um, we would like to understand, okay, the next phase could be, um, you know, really launching it and getting X many users. Um, and then we try to, to, to see whether we believe that the amount of money that the founder is looking for kind of matches our experience and how much you need for that. Phase, um, and then we think whether, you know, the next phase, uh, after we've invested, whether they can realistically reach that, um, next milestone to be able to raise more because.

• 5:05Speaker 02

  Ultimately, most of these, um, high-growth businesses will not just take a seed round and then be finished with that. And, um, obviously, when it's a more later-stage investment, then we look at, um, at other things like launching into a new market. Um, or, you know, fine-tuning, um, your monetization.

• 5:23Harry Stebbings?

  And do you have a preferred round to go in?

• 5:25Speaker 02

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

• 5:30Harry Stebbings?

  Okay.

• 5:31Speaker 02

  Which means it's on the earlier stage of the kind of total fundraising cycle from, you know, an angel round all the way to an IPO or. You know, these days, these huge pre-IPO rounds.

• 5:42Harry Stebbings?

  Absolutely.

• 5:43Speaker 02

  Um, but as I said, I think it's really important to define clearly where you are right now as a founder and where you wanna get with the money. Um, because if, if that's not clear, we're not just, you know, a bankrolling machine to cover your costs. Um, and, um, it also comes back to this, um, it's best to raise money when you don't actually need it, or at least if you can. Give the investors the impression that you are not really, you don't really need the money, but if you had the money, you could, you know, make X, Y, or Z happen.

• 6:13Harry Stebbings?

  Do investors mind if you almost stockpile money in case times get worse in the future?

• 6:19Speaker 02

  Um, we, we think that, you know, if you have money in the bank, you should allocate it to. The place, uh, where it can generate the most return for your company. Um, so I think stockpiling the way a company like Slack is doing it at the moment seems counterintuitive, um, from my point of view.

• 6:39Harry Stebbings?

  Okay.

• 6:39Speaker 02

  Um, but I think at the same time, you know, everybody will agree that you should raise while you can raise, because there's always a time where you can't. And so, you know, if you can raise at decent terms, um, i.e. a good enough valuation without giving away too much equity. It's probably a good idea to raise now, even if it's a little bit more than what you need.

• 6:57Harry Stebbings?

  So now we've decided that our startup, our metaphorical startup that we've just created, that it is, we want aggressive growth and the only way to get that aggressive growth is through getting around the VC funding. So what next? What, how do we connect with VCs? How do we uh get meetings with them? How do we get our foot in the door and proactively position ourselves well? How would you like to be contacted?

• 7:25Speaker 02

  So that's obviously what a lot of people um struggle with and the, I think the simple answer is it's all about um reaching out to the right people. Um your i- initial investors, typically people have invested in companies before um someone like Wellington or other VCs do. So those angel investors should be in a position to point you in a couple of directions with regards to more later stage investors. And if these guys um are trustworthy and, you know, make good choices with their investments, then people like myself are very keen to hear from them, you know, who I should be looking at next. Now, if you don't have that, which is obviously often the case when you are the first time founder, um

• 8:10Speaker 02

  it's really, um, I think a good idea to just look in your um LinkedIn network or um at university, like who are people that know people that have maybe set up a successful startup in the past? And who you can talk to and see whether they know investors who might be interested. Um but it's really all about getting um getting other people to sort of lobby for you.

• 8:31Harry Stebbings?

  And how should we phrase that opening email to an investor?

• 8:35Speaker 02

  Um I would try to avoid sending a completely open email to an investor. I, what I would try to do is um find someone to send that email for you. Um and giving this person really good ammunition to get the investing excited, i.e. um having like a short PDF, PowerPoint, um like maybe ten slides. And that outline what a business is doing in really simple terms and that the founder is comfortable sharing. Um, because you know, it will probably get forwarded to other people.

• 9:04Harry Stebbings?

  Absolutely.

• 9:05Speaker 02

  And and then at the same time, you know, um, make it really, make it really clear why you wanna talk to a particular investor. Um, because it's really frustrating, um, when, you know, when people blanket email ten investors at the same time. And, you know, it's hard to spend time on that kind of thing. Whereas when they say, Stefan, you know, we've read your blog post on X and, you know, we think your recent investment Y is really cool. Um, and, you know, we would like to learn from you, um, what you, um, did when you worked in e-commerce, because that's really relevant to what we do. Then obviously I would be keen to help, um, as opposed to the investor, you know.

• 9:42Harry Stebbings?

  Absolutely. So now we've got that intro, we've got our startup friend who's introduced us and we've been called in for a meeting. What you expect a ten slide PDF, do we need a cap sheet? Do we need a financial breakdown, financial forecast? What do you expect in terms of documentation for the initial meetings?

• 10:02Speaker 02

  So I I would say the the ten page PDF is something where you can get the investors excited. When I go to a meeting as a founder, I would probably have something between ten and twenty five pages with me to explain all the important aspects of the business. But not necessarily look at every slide during the one hour meetings, typically a one hour meeting. But rather try to tell a story, why you start the business, why you're so passionate about this and why you're the right person to to to tackle this hopefully huge problem. And it's really important to, um, sort of build a friendly atmosphere during that meeting. Because ultimately it's a people business and we we like to invest in people that we want to work with.

• 10:45Speaker 02

  So, um, if people come across as arrogant or if they're really late or, you know, if they're just very cold during the meeting, that I think is not really helpful with, um, getting the the vibe right.

• 10:58Harry Stebbings?

  And how can founders make the most out of their meeting with VCs? Are there any questions that founders should be asking?

• 11:05Speaker 02

  Um. I I don't think there's any particular questions, but I think um a lot of investors will talk about all the introductions they can make. And I always recommend people to really follow up on that and, you know, not let any offers for an introduction to a potential customer or potential portfolio company, etcetera, like slip away. Um. I think the other thing is is

• 11:29Speaker 02

  trying to um understand what the investor is looking for. So, you know, what is their vision for the particular space you're working in? Um. What additional data points are they looking to see, especially if you're talking to a more junior person in a fund? Um. Trying to understand what the the the other people in the team um are usually asking and sort of as a preparation for the next meeting because when you go for that second meeting or second call, um and you can show that you've listened to the questions and the feedback in the first interaction and kind of, you know, bring good answers to those questions. I think that's a really powerful way of showing that you are a easy person to work with.

• 12:07Harry Stebbings?

  And with the increasing amount of capital available nowadays, um competition obviously between VC firms has increased for the hot startup rounds. So what services can VCs bring other than more, other than connections?

• 12:23Speaker 02

  So I think it's it's a combination of of of connections on all levels of the of the seniority spectrum, right? So you may know a couple of um really good designers, um but you also may know someone in the acquisition team at a large Silicon Valley acquisition um company. Um. But it goes beyond that. I think it also goes um about sharing um best practice in the portfolio. Um. And it can mean uh just really helping founders do the right thing at the right time, because a lot of the times um people are doing it for the first or the second time. Um. But of course, we've seen similar situations several times in in in our portfolio and so kind of

• 13:08Speaker 02

  bringing that experience, I think, is is probably the most important thing we can do.

• 13:12Harry Stebbings?

  And when you're assessing the size of a market for a startup, how how big is, I'm sorry, how small is too small?

• 13:22Speaker 02

  Ah, that's a good question. I think there is no too small. Um, I think if it's too small, then you just need to um think about uh you know, adjacent things that you could involve your product to or other people that you could um sell a similar solution to. Um, I think the the the important thing about the market is that uh, you know, everybody, it's easy to make it look big. Um, but it really comes down to a realistic, to being realistic of how much you can address of that market. Um, you know, some people are taking um, say, a ten percent commission in their marketplace. Then suddenly a a big market is only ten percent of um of that you can actually address.

• 14:06Speaker 02

  Uh, so I think being clear and being uh honest to yourself when you estimate a market is actually more important than showing that it's huge, because it's relatively easy to just make up something really big.

• 14:18Harry Stebbings?

  Absolutely. And and then we leave the meeting that we've had with the V C and they say they'll be in touch. But a week later, we haven't heard from them. It, should we follow up? And if so, how?

• 14:32Speaker 02

  Really interesting problem, right? And I think everybody has that. Um, I have that and, you know, and and founders that reach out to me have that. I think it's all about sort of gentle nudges and it's totally okay to to follow up once or twice. Um, the thing is, I think as a as a as an entrepreneur, you need to understand that um, the investors are working on several things at the same time. Um, and while for you, the business is like the one thing, for the investors, probably one of five or ten things they're currently looking at. So it's sometimes other things just have to be dealt with more urgently. And now that that still means though that, you know, you want to, when you get back and then follow up and say, hey, you know, you you said that you'd get back to me next week. I haven't heard from you.

• 15:17Speaker 02

  I would include um success stories. So, by the way, we've signed, you know, um, three more clients and we've had a real good um new hire. And to make it um really worth the while for the investor to think, ah. You know, even if I wasn't so excited the first time, uh, sort of to get re-excited about the topic.

• 15:36Harry Stebbings?

  Sorry, please go.

• 15:38Speaker 02

  No, the other thing um was that, you know, it's um, then it takes longer. And it usually um means that there's still conversations going on where, you know, I may be asking someone in our portfolio for feedback on on a particular technology or a particular product. And so if the founder um in their follow-up emails give me more ammunition to kind of present the case again in our internal meetings, um, the easier it becomes.

• 16:05Harry Stebbings?

  And when you're saying no to a startup, um, how do you phrase that? Do you provide feedback? Or is it quite a, Kurt, I'm afraid it's not for us?

• 16:14Speaker 02

  I would say it depends on the on the depth of the um interaction that I've had with that person. So if we've had several meetings, um, and we decide not to do it in the end, I usually try to be as transparent as possible because I would ultimately like to help that person to to be successful. And, you know, there's usually, um, usually it ends up being a reason of, you know, we like what the team is doing, we like the product, but nobody is extremely excited about it. And I think, you know, you don't, you don't want sort of to marry an investor um that isn't super excited about what you're doing. So it's probably better in that case not to to invest. Um, but of course, um, the, you know, I still would like that person to be successful.

• 16:57Speaker 02

  But of course, if if I've received a um app sort of a email that says, dear investor, then um the uh pass on that will be extremely short.

• 17:07Harry Stebbings?

  Okay. And if if it's okay with you, we're gonna move into a quickfire round now.

• 17:12Speaker 02

  Sure.

• 17:12Harry Stebbings?

  So what single thing do you most look for in a company pitch? What thing impresses you?

• 17:17Speaker 02

  So I'm usually scrolling to the traction or achievement sort of slide because I wanna see what the what the team has actually built. It's really easy to talk about, kind of, next year we'll do this much in revenue and, you know, we'll we're addressing a big market. But what I'm interested in is typically what have they actually built and, you know, how many customers customers have they reached and, you know, how, what people have they hired?

• 17:42Harry Stebbings?

  And then which pitch or preliminary email or initial email has impressed you most and why?

• 17:51Speaker 02

  I mean, I think there's many good ways of reaching out. I think what I personally I like the most is when people really refer to something that I've done in the past. So say I did have worked for Citymapper or that I've worked in stylistic, the ecommerce company, and then ask me specific advice about what I learned there. Because I think every VC wants to be helpful in every interaction with founders and entrepreneurs. And so, you know, just being a recipient of some information is one thing, but being able to, you know, help the founder even in my first interaction with them is something that is really rewarding and therefore I'd be much easier reachable when I see that in the initial email.

• 18:30Harry Stebbings?

  Absolutely. And your most recent investment and why you said yes?

• 18:37Speaker 02

  So, um, my last deal was the, um, a company from London called Onfido, um, who do basically background checking, um, as a service, which is very developer friendly, so you can have an API um, to include their checks for right to work and criminal background. And if you, for example, are on-demand cleaning company and you want to check all your cleaners because you have many new cleaners every, every week, every month. And we, we, we liked that team a lot. And when we met them, they're, um, three guys from Oxford, um, who, who are very smart and, you know, know exactly what they're doing.

• 19:18Speaker 02

  Um, but we, we also got really excited because of the, the immense opportunity in the on-demand economy and sort of the sharing economy where everybody interacts with everybody. Um, so you don't know who's driving your car, you don't know who's looking after your child, you don't know who's making your food. Um, but what you want is that you want to trust all of these people. Um, and so we think that Onfido is in an excellent position to, you know, to be the enabler of trust, um, for the for this type of new interaction between people.

• 19:49Harry Stebbings?

  Well, Stephane, thank you so much for coming on the show. It's been an absolute pleasure having you.

• 19:53Speaker 02

  Thank you.

• 19:54Harry Stebbings?

  Now, for all the resources mentioned in today's show and for the links back to Stephane's articles on Medium, please head on over to www dot the twenty minute VC dot com where it will all be under episode thirty-five, Stephane Von Perga. Thank you so much and we look so forward to seeing you in the next episode.