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This week we were doing diligence on a really promising seed-stage company. We had a great initial meeting with the founders and as part of our follow-up diligence asked for a financial model (historical and forward-looking) as well as trend data for the KPIs they focus on.

The founder responded quickly, shared a financial model, a marketing funnel and a handful of graphs showing the KPIs with the response “Here’s our data, let me know if you have questions.” 

Well the prompt response was great and overall the data was well organized, the founder missed a key opportunity to control the narrative and focus on what THEY thought was most important for the business.  

I believe it is critical for founders to view EVERY interaction with investors as a chance to continue to tell their story and sell them on their vision of the future – an unguided walk through pages of data completely misses an opportunity.

Here is what I recommend founders do once they progress to the data stage of diligence. 

First, have an organized and simple data room. At the pre-seed and seed stage this might only contain a handful of documents, which at a minimum should include 1) Financial model 2) TAM back-up 3) Early usage data/KPIs 4) Customer list. In addition to those, the data room should include a narrative for each piece of data in the data room. 

The narrative should be a clearly written document that is exactly how you as the founder would position and walk an investor through each piece of data in the data room, including each tab of your financial model.  Most importantly, this allows you in the absence of being there to put a stake in the ground for what is important and how to view the data (always be selling your vision). But it also provides a benefit to the investor, instead of spending the first 30 to 60 minutes trying to figure out how everything fits together they are handed a blueprint that helps them get up to speed much more quickly.

Second, and most importantly, don’t just send the data room! 

Schedule time with the investor to walk them through what is in the data room and highlight the key takeaways from the files. Founders are often hesitant to push back on the investors request to just send the data, but if the investor isn’t willing to quickly schedule 30 minutes to walk through this, they honestly aren’t that interested in your company (also avoid the “I can’t make the call, but send the data to my associate and they will follow-up” that also almost certainly going nowhere).

When we raised my Series-A as a founder multiple times we fell into the “just send the data” trap and most of those never resulted in a followup meeting. 

When we raised our Series B we requested investors get on the phone to go through our model and data.  We got a handful of declines for follow up calls to go through our data, but that was very helpful because it also allowed us to focus our energy on the investors who were most engaged. Those who did join for calls were highly engaged and almost always progressed down the fund-raising funnel.

Control your narrative, view every engagement as a chance to sell your vision and to better manage your own funnel run your process in a way that forces investors to show their commitment and interest to you.

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