How to Approach VCs as a First-Time Entrepreneur

By David Klein, Wharton MBA alumnus, co-founder of CommonBond

When people ask me, “When is the right time to talk to VCs?” my answer is, “Yesterday.” Why? Because many entrepreneurs – especially first time entrepreneurs – never really feel “ready” to talk to VCs. “Everything has to be perfect… Results aren’t good enough yet… All ducks must be in a row.” Right? Wrong.

First Wharton borrowers - smaller
CommonBond’s first Wharton borrowers.

The fact is, the sooner you speak to VCs, the sooner you establish the baseline from which you need to progress and improve. As you talk to VCs over time, you’ll earn their trust and confidence in you as an entrepreneur and in your ability to execute against your plan. VCs love entrepreneurs who do what they say they’ll do. (In fact, that’s why our lead investor tells me he invested in our last round.)

If you can follow three specific guidelines, then I think you’re well on your way to your raise. I’ll call the guidelines “the three P’s.”

1. Preparation. Run the models. Think through more scenarios than you’ll ever be asked to consider, and then think of more. Think of all the gaping holes of logic in your business model and fill them. Know your numbers. Cold. Be confident that by pitch time, you’ve run all the scenarios, know all the weaknesses, and have filled the gaps. The more time you spend preparing, the more confident you will be.

2. Performance. Tell your story better than anyone. Tell a clear, concise, and compelling story. Leave out unnecessary details for the sake of cogency. If you don’t get to details an investor cares about, he or she will ask you, and because you’re prepared, you’ll be able to address their questions with expertise and poise. Again, and again, and again. And if you ever find yourself without an answer, take that as feedback to find one after the meeting. Your performance will then improve the next time you “take the field.”

3. Persistence. You will face a lot of rejection. Don’t just expect it, chase it, because that’s where improvement lives. Your job is to get better… faster than anyone else in the space. Time is not on your side, that’s why direct feedback is crucial. It gets you to where you want to go faster. Accept nothing but the unvarnished truth. That is the only thing that will make you better. And “better” is the only option you have.

This is not easy. In fact, it’s not natural. We’re not built to yearn for more rejection in the face of it. Yet that’s what the great entrepreneurs whom I’ve met all do. Rejection is their mana. The feedback behind rejection is their secret weapon to grow bigger, faster, stronger. Only a few people realize this, and fewer still are able to do it. But it’s not inhuman; it’s enlightened. You can find the inner strength and motivation to keep pushing forward. Know that the only real rejection can come from your customers – don’t let investors, or yourself, get in the way — and even then, it’s just feedback to improve.

So if you’re looking for the magic bullet on how to raise capital from investors, it’s not a specific tactic, so much as a mentality, an approach, an ethos: prepare, perform, persist.

Taking your business from idea to operational is a tremendous rite of passage. No amount of rehearsal will ever guarantee dollars through the door, but you – as your most authentic, passionate, and determined self – can.

David_full-size headshotBio: David Klein is CEO & Co-Founder of CommonBond, where he has led over $100M of fundraising for the company since its inception at Wharton in November 2012. CommonBond is a student lending platform that provides a better student loan experience through lower rates, exceptional customer service, and a commitment to community. CommonBond is also the first company to bring the One-for-One model to education and finance: for every degree fully funded on the company’s platform, CommonBond funds the education of a student in need for a full year. David worked in consumer finance at American Express, as Director of Strategic Planning and Business Development, where he led a team that managed a $250M annual portfolio. Prior to American Express, he worked at McKinsey & Company, where he advised clients in the financial services industry.