Comment by marcell
2 years ago
You can collect these “soft commits” to make it easier to land a lead.
You can tell the potential lead, “we have $X in soft commits, so if you become our lead, our company will have total $X + $Y funding.” It makes your pitch to the lead more compelling.
They'll ask who your "soft commits" are, and they'll read between the lines; if any of them are significant firms, it'll get read as "those firms refused to commit, there must be a reason".
Michael Seibel had a video a long time ago from a YC VC class, and related his strategy to work around this, of setting a very short deadline --- like, do all the meetings inside of a week, and tell people "get your term sheets in by the weekend". The idea was: don't give investors an opportunity to stall, and, by stalling, send an adverse message to all the other investors.
(I don't know if this works at all anymore, but it gives you an idea of what the issue is here.)
I heard the short deadline advice also, it’s nice idea but has flaws:
- most VCs will have at least a few days delay on when they are willing to meet you
- intros are required, and often intros come out of other VC meetings. This means you can’t shotgun everything
- if a VC wants to meet after your “deadline”, will you actually say no? Who has more power?
If you are a hot deal or Michael Seibel himself, the short deadline probably works. For mid level startups it’s not as easy.
I know we could have, but we thought it would be dishonest of us to do so since we had no intention of taking the soft commits. They were always from investors that had nothing to offer and apparently no conviction in their belief either.