Ask a VC: How to Approach a Deep Science VC

In early 2022, OUP hosted a webinar on Pitching 101: How to Present Your Startups and Technology Innovation to Potential Funders. Due to the overwhelming interest in the topic, we wanted to gain additional insight from the OUP investment team on best practices for a crucial step before the pitch – how to approach VCs. We spoke with our Tech Associate, Ajay Rayasam, and our Life Science Associate, Margalit Haber, for their perspectives on how best to initially interact with VCs. While some of their insights were similar, as with all individuals in the venture capital space, they did have differing opinions. The interviewees’ statements below have been edited for clarity and length.

Ajay: Before seeking funding, I recommend that an entrepreneur takes a step back to understand what kind of company they want to build and what funding is required to get to the next milestone. Not all companies may require VC funding at this time or at all. VCs are looking for outliers that can scale to  $1B+ in enterprise value to generate a significant return for their Limited Partners. It is important to outline your goals and see if it aligns with venture funding. Luckily, there are alternate forms of funding outside of VC like non-dilutive grants.

Margalit: I always tell people to approach VCs when you have a clear, concise story that you think is interesting and compelling, even if you are not raising money. With those conversations, you are starting to establish a relationship with that VC and fund; you can learn a lot about how that VC operates. So, you want to start that relationship early – the earlier the better. I think the only time that you want to be cognizant of whether it is too soon to reach out is if you have not done your homework; you are still learning about the competitive landscape you are in and understanding the market. We use these conversations to assess the founder as well, and you want to come across as knowledgeable about the space as possible. The other time to wait is if you do not have a compelling story to tell yet. Are you missing a key piece of data or trying to better understand where you fit into the market? As soon as you feel confident enough in what you know and the story, I think that is a great time to try.

Ajay: The ideal way is through an introduction from a mutual contact. VCs tend to prioritize their time in maintaining a strong reputation within their respective networks. When a trusted contact makes an introduction, I always pay attention more closely. This may present a challenge to many founders who do not have access to that type of network. So, I suggest investing more time into building and maintaining your network. Focus on one conversation at a time and find ways to help others without the expectation of an immediate return. Over time, a founder’s job is to raise money, recruit sales, and generate revenue, all of which are predicated on one’s ability to foster genuine, high-quality relationships.

Margalit: We get so many opportunities crossing our desks, so standing out is challenging. The best emails I get have a clear and concise explanation of what they are doing with details regarding why it is impactful and differentiated. Some email summaries are missing why this is different from anything else that has been tried before in this space, sector, therapeutic area, or clinical indication. I think you want to be very explicit about that. What you are trying to do is explain to the VC why this is going to be successful where others have failed. What makes this differentiated? Or, if nobody has tried to go into this area, why has nobody gone into this interesting market? That will help you stand out.

Ajay: Thoughtfulness. For anyone who has received a cold email, a generic one is easy to filter out. Investors will appreciate the extra time spent on a concise, thoughtful email. We look for teams who are commercializing a unique technology within a large market. Discuss the strengths and experience of the team, the technical differentiation, and the evidence you have discovered on the market opportunity. You should mention why your company is a fit for the fund – highlight what else they have invested in, mention that you read their blog post, or some type of initial connection to show that you have spent the time to understand their investment thesis. I would respond to that type of email.

Margalit: In a cold reach out, include a summary that highlights why you are differentiated, novel, and interesting with a non-confidential deck attached. It is helpful to address your background upfront as well. We are investing in people as much as we are investing in interesting technology. In an email, keep your background brief, but add a short bio to your deck. Some people will simply put logos of companies they have been in which speaks to their experience in biotech or pharma. If you are a scientific founder and have not worked in industry, you can put logos of your institutions and talk about why you are well-suited to be working on this. Another thing that you can add is, what is the ask? Some people will be reaching out asking for feedback or initial thoughts. Other people will be asking for funds for a specific raise. Including the ask in the email helps level-set your expectations of the conversation.

Margalit: For me, the best “warm” introduction comes from a VC peer whom I have built a relationship with and whose opinion I trust. What is nice about that is the intro is coming from someone who assesses opportunities the same way that I do – a biotech VC looking at them from the same rigorous perspective.  When I get an email from a peer about a company, I always take a look. Introductions from other people in your network are good as well – entrepreneurs you’ve met, faculty you know who are in touch with some VC funds, and so on. It is important to note though, at the end of the day, if you could email me enough background information about the company for me to get a quick feel on whether it would be a fit for our fund, then I am going to seek out more information. I am not going to pass on an opportunity that I think could potentially be interesting just because it did not come through someone I know.

Ajay: The warmer, the better. A systematic approach is to focus on prioritizing investor relationships by investment stage. Angel investors or pre-seed funds are more willing to write the first checks. Many are former entrepreneurs or high net worth individuals who understand the entrepreneurial ecosystem. They are more willing to take risks at the earliest stages of a startup. As you develop this relationship, they will provide ample advice and are naturally incentivized to introduce you to later stage investors (seed or Series A+ funds). Some will be more reliable than others, and over time, you will build mutual trust with a subset of them. You need to have a long-term perspective, because many investments may take years to come to fruition. 

Margalit: I always appreciate getting non-confidential decks in emails. Sometimes, the summary in the email is not sufficient, and the key pieces of information that I need in terms of why this approach is differentiated are in the deck. If the summary did not grab me, I am not going to reach out for the deck. But if I have the deck already, I will scroll through it, even if I think the summary was not necessarily compelling. Providing that extra information cannot hurt you, it can only help.

Ajay: I also appreciate a pitch deck and links to your supporting literature. My goal is to get to a “yes” or “no” as quickly as possible. If there isn’t a fit, I will provide my rationale since I want to be respectful of an entrepreneur’s time. The more information, the better.

Margalit: When we are at events, we are looking to meet with as many people as possible – whether that is other investors, entrepreneurs, scientists, academic founders, or university tech transfer individuals. We are looking to broaden our network; that is the whole point of going to these networking events! If you want to approach a VC at a networking event, just introduce yourself. If you are curious about the fund, you can ask about the fund size, strategy, or areas of current interest. That is a great way to break the ice. Then, you can talk about your company. It is okay to do your elevator pitch if I ask you for it. But make sure it is your elevator pitch, not your ten-minute pitch. Don’t walk up to a VC, introduce yourself, and just start giving your pitch without building up to it in conversation.

Ajay: Go for it! The best part of our job is meeting inspiring founders who are working on the most difficult problems. It is a privilege to be able to invest, so we are always open to speaking. Introduce yourself and describe what you are working on. It always helps to build a connection and share your underlying motivation for starting the company.

Margalit: We usually advise that founders leave valuation expectations out of their decks and emails. At the end of the day, we let the market decide what the valuation of your company is going to be. There is going to be discussion and negotiation around the topic once the investor is interested enough to possibly invest. Sometimes, people will highlight the financing rounds of companies that they think are comparisons to their company. This makes me think that they are expecting the same valuation as those companies. Exit comparisons are helpful to see in a deck. Funding round sizes for those companies are not, and they can give the wrong impression. You should be assessing the market and seeing what valuations other companies are getting but remember you do not know exactly what data that company had at the time they were raising since so much of that information is confidential. You should be doing your homework and research on this but leave it out of your deck and your email. 

Ajay: I would make sure to show an equal amount of respect to each investor regardless of their title or role at their respective firm. VC firms tend to have small offices, and news travels fast. In some cases, the associates or junior partners may become your internal champion at the firm. In my opinion, VC funding is a two-way street, and as an investor, I am also accountable for representing myself and the fund in the best manner possible. If both sides show mutual respect, we are all better off.