A record amount of venture capital--$148 billion--was invested into private companies last year, but that's not to say landing VC funding is an easy task. It helps to know what to expect. Here are some surprises several founders and CEOs discovered in the process of trying to get money to take their companies to the next level.

VCs can move quickly.

"I have experience with both venture capital and angel investment. The biggest surprise I encountered is VCs can--and often do--move as fast as individual investors (angels). The perception is VCs will require months of back and forth, multiple meetings, buy-in from multiple partners, etc. Our VCs closed as quickly as our angels. The lesson is to entertain all types of investment and not to rule one out in the early stages."

--Venky Balasubramanian, cofounder and CEO of Plivo, a communications platform that simplifies how businesses integrate SMS and voice communications into their applications which has grown to over 70,000 customers with 200 employees across three offices globally and has been profitable since 2015

VCs can be narrowly focused.

"My biggest fundraising surprise was how narrowly focused most VCs are. If it is not a 'Billion Dollar Idea' then investors lost interest. It was as if a company that could generate $750 million with great margins was of far less interest than a billion-dollar company with razor thin margins (if any margins at all)."

--Jayna Cooke, cofounder and CEO of EVENTup, an online marketplace for event spaces with over 7,000 event venues nationwide, thousands of clients and recently acquired by Gather Technologies

Traction matters more than your presentation.

"I encountered two big surprises in the fundraising process. First, the dog and pony show isn't necessary. I raised a significant funding round with two slides. The first showed revenue growth and the second said, 'Any Questions?' If you are certain about your idea and business, and already have some traction, the money will follow." Second, I was surprised to learn the way VCs gauge 'success' is a bit arbitrary and definitely a moving target. With one round, all VCs cared about was the 'Rule of 40' (GP Ratio = Growth rate + Profit). The next round it was all about the 'Magic Number' (sales efficiency equation). Don't assume what worked on one fundraising tour will work on another. VCs are chasing the 'what's next' just like everyone else."

--Manny Medina, CEO of Outreach, a sales engagement platform which supports more than 1,200 sales teams and 15,000 reps worldwide and recently raised $65 million at a half billion-dollar valuation

It's mostly men.

"I was surprised how few women I encountered while I was raising money and when I did, there didn't seem to be a drive to support other women entrepreneurs. Several years later, we have raised over $5 million and have a successful company, which means we now get inbound interest from investors. However, 99 percent of the VCs who contact me on LinkedIn or via email are males. Still no women." 

--Ximena Hartsock, who previously worked for the D.C. government in the Fenty administration and is founder and COO ofPhone2Action, a civic technology platform with more than 400 clients and doubling in size each year

A lot of emotion is involved in the decision-making process.

"I am surprised how much emotion is involved in the decision-making process for VCs. They don't operate as analytically as later stage investors. While VCs will analyze objective data (e.g. market size) when reviewing your company, they view those numbers through the lens of how gut-level excited they are about the story you've told them for why what you're doing is important. A great story needs both a great teller and the right audience. If you find the right partner at a firm for your story and they get emotionally excited about it, they'll do a lot of the work making the objective data strengthen your story rather than disqualify it."

--Harj Taggar, cofounder and CEO of Triplebyte, a technical hiring marketplace used by companies like Apple and Dropbox to hire top software engineers which recently raised a $10 million Series A with investors including Paul Graham and Marissa Mayer

Published on: Jul 30, 2018