The single most important thing when you’re pitching me: about to explode

Ask 10 VCs what the most important factor is when pitching them, and you’ll get 15 different answers. Some will answer the market, others the team, and some others, the product. I believe that my answer is what, deep down, VCs really look for, even if they’re not willing to admit it.

A business about to take off.

FOMO is real. It exists in VCs. Psychologists have often found that losses are far more powerful than gains in the human mind, and VCs aren’t exempt. So while greed is real, regret is more powerful.

The best way to pull a VC into the round — knowing the usual games VCs play of slow-rolling a deal, watching it for a while, not committing when the round is just starting, etc — is to make them worry about missing the deal.

As you’ll see in my blog post on compelling events, it’s very important not to invent FOMO — if you tell a VC they’re going to miss out, then the deadline/compelling event passes and you still need money, you lose all credibility. But short of that, what you really need to think about is growth rate. As this blog has discussed many times, growth rate is the most important factor in a company’s valuation, as it can substantially scale up or down the revenue multiple a company gets. Growth rate also, therefore, makes you more attractive to investors and — heaven forbid for those of us in the VC world — lets you grow to the point where you don’t need venture money to continue scaling, you can use customer payments to grow.

So ultimately, if I see two companies pitch that are both awesome deals, the key factor for me is going to be which one is about to explode. Which has a customer pipeline with a lot of closes over the next 3–6 months, which has figured out how to apply capital to drive growth and now just needs funding. I’d rather jump into a deal with more risks that’s going to grow rapidly in the short term despite those risks and figure them out, than invest in a buttoned down company that’s having trouble hitting its ramp. A fast growing company can always raise money to fix its deficiencies — a slow growth company often dies a slow death.