What a pre-seed fund needs in your data room before it wires the money

• Yin says over 90% of the companies Hustle Fund makes offers to have no data room yet, and the fund cannot send the money until they build one, because its auditors check every portfolio company.
• An angel investing their own money may ask for nothing; an institutional fund needs incorporation documents, founder and employee agreements, IP assigned to the company and a clean cap table.
• Yin advises keeping financials and projections very light at the early stage, because more detail gives investors more to nitpick and a reason to pass.
• Share the data room when an investor asks for it, or a single folder link when they ask for one item, rather than sending it proactively after a first meeting.
• No VC will sign an NDA to see a data room; if you do not trust an investor, Yin says to end the process altogether.
• Keep documents current during a long raise, because figures that stop months earlier make investors wonder whether the business has cratered.

Over 90% of the time, Elizabeth Yin says, the startup Hustle Fund has just made an offer to has not yet prepared a data room. And the fund cannot send the money until it does (around 6:24). Yin, general partner at the pre-seed fund, explains why: VCs go through their own audits and are scrutinised by their investors, who want to make sure they are investing in legit companies. She is quick to add that it is not a big deal. It slows things down. Don't panic.

“When we make offers I would probably say over 90% of the time the company has not yet prepared a data room, and we as a firm cannot send the money until they prepare the data room.”

Elizabeth Yin, general partner, Hustle Fund

The session was a webinar run by Visible, which sells investor update software and had launched its own data room product two weeks earlier. Yin starts by taking the fear out of the term. When she was a founder, she says, a data room sounded super scary and very complicated. In short, it is an area where you put a whole bunch of files and share one link with a whole slew of folks, so you are not preparing the same docs over and over.

“In startups, nothing really looks great for the most part, and so the more you overshare, the more you might scare somebody away.”

Elizabeth Yin, general partner, Hustle Fund

How much goes in depends on who you raise from. Yin says an angel may not need anything, because it is their own money and nobody is auditing it; when she angel invests, she never asks. Her fund is different. Its auditors literally go through every portfolio company to check that it is incorporated and that the money is not going to people's personal bank accounts. So the minimum is incorporation documents, proof the founders work for the company, employee contracts, and IP assigned to the company, so that a rogue employee cannot leave with it tomorrow and start a competitor.

“I think if you have a data room that's organised, it's also a reflection of you, and that looks good.”

Elizabeth Yin, general partner, Hustle Fund

Yin flags a problem for founders outside Silicon Valley (around 10:35). A lawyer who is not used to startups can incorporate the company but miss pieces like IP assignment, vesting schedules or shareholder agreements. Her advice is to find a Silicon Valley firm that offers a free call, have them look at what you have, and consider switching if it is not buttoned up. On the cap table, she says investors want to see how clean it is. She sometimes sees advisers take half the company before it has even started, which is not standard, because investors want the founders incentivised to run the company.

“No, no VC will sign an NDA.”

Elizabeth Yin, general partner, Hustle Fund

On financials, Yin's advice is to keep it very light. The more information you have, especially around projections, the more people can nitpick at, and that becomes a reason to pass. What does count as a red flag: data in the room that does not match your pitch deck, and contracts that are not completely signed or differ from what you claimed. Board minutes start to matter as you approach a Series A, if the board includes someone other than the founder, such as an investor or a mentor.

The contents rarely change her decision, Yin says. A clean room does impress her, and by clean she means folders labelled properly: one for incorporation docs, one for employee agreements, and so on. With more than 90% of companies at this stage having no data room at all, an organised one says the founder is buttoned up and detail oriented (around 14:52). She also likes a readme with links, updated as the room grows. She used to see data rooms as busy work, she says, but sending one link beats attaching files to emails for every investor.

Her general rule is not to overshare. Send the room when an investor asks for it, Yin says, or send the link to one folder if they only ask to see your signed contracts. Sending it proactively after a meeting may open a whole can of worms. Asking for an NDA is pointless, because no VC will sign one (around 29:43). As for who reads it, she guesses associates go through it at larger funds. At Hustle Fund the lead investor does a very cursory check that the things the auditors will ask for are there.

Several questions were about trust. Yin's view is that an investor is signing up to be a partner to you, and the data room is the least of your worries if they turn out to be a bad one. She sorts difficult investors into two groups. Most are trustworthy but a pain, asking for lots of homework; she says to be direct, ask for the full list of what they need, and manage your time. The others you simply do not trust. If your Spidey senses say so, cut it off: you don't need to take somebody's money.

Customer references need protecting too. Yin suggests telling investors plainly that your customers cannot be inundated with calls, and making the reference call the very last step, once the investor is fully committed pending that call (around 25:30). Keep the room current through a long raise: if you pitch her in June with information that stops in March, she starts to wonder whether the business just totally cratered in March. For Series A and beyond, she says, your data room should be nearly perfect.

For a founder, an early-stage data room is mostly the paperwork a fund's auditors need, so incorporation documents, IP assignments, a clean cap table and signed contracts matter more than volume. Having them ready before the offer keeps the money from being delayed.

0:02 all right I'm going to share my screen and organize my windows a little bit all right we're gonna let people filter on in welcome welcome welcome visible history today everyone here is part of History this is our highest registration event we've ever done oh wow that speaks that speaks to you Elizabeth and not to us so no so you're following it in in clout well thank you you flattered me too much but you know data rooms are such a scintillating topic I don't know why people wouldn't all want to come and talk about data rooms all day I was just on a I was just on our leadership call right before this and I ended it with saying I gotta go I've got an electric Factory of content now we're about to share with hundreds of people worldwide feel free to drop in the chat where you're calling in from I bet we can get almost every continent maybe net maybe not Antarctica

1:06 represented here but let us say you're from we're gonna get started here in a second and this is being recorded so we will send this out I know some of you have mentioned that question already so yeah we record these we'll send out the recap usually within 24 hours I no longer form recap in the next week if you're not subscribed to the visible weekly we will definitely mention this in there so you'll want to go on our website and subscribe to that there awesome chat is disabled well thank you for letting me know everyone can chat now that could be dangerous we'll see how that goes yeah let us know where you're from thanks for letting me know that it is disabled I'll clean these up and we'll get started so yeah welcome Elizabeth for you that I don't know Elizabeth it's the GP of hustle fund she was previously at 500 startups she co-founded and ran an egg tech company that was acquired in 2014. I

2:12 believe this is your third or fourth webinar with visible so thank you so much for joining us Elizabeth into everyone here foreign Matt on our team he is standing by with questions and we'll be able to field your questions we'll either try to answer them real time if it's super relevant to the slide or we'll wait to the end so if you have any questions write in I'm going to try to keep this to a tight 45 minutes and as mentioned we will go ahead and send this out to everyone at the end so we record this we'll send it out and we'll send it in an email the next 24 to 48 hours for you that don't know hustle fund I think it's like the premiere pre-seed fund there is they have three funds now pays to do 100 Investments this year I think Elizabeth you mentioned what you have 400 portfolio companies mm-hmm pretty insane generalist making a 50 000

3:14 Investments anything I miss in here that you would love to add while you have the time to talk about the fund it's great thank you all right ah awesome so today we're talking data rooms so visible we launch our data room product two weeks ago and even just based on the the attendance here and the appetite for this webinar I think we have a lot to learn and and just some fun debate and and what should and should not be included when to share it what you should put in your data room but maybe like just to start things off like do early stage startups need a data room yeah well so unfortunately like everything else the answer is both yes and no so obviously if you are running your company and you're not raising money and you just have you know your company and you're working on your company you don't you don't actually really need much of anything you you don't need a data room but if you have aspirations of raising money or maybe working with a strategic partner closely

4:17 then the answer is yes and to what extent your data room is involved or complex will depend a lot on who you're raising from and also what stage of company you're in and I think we'll probably dig into both of those as we go along so I suspect many of the people who are here want to raise money at some point and so you will need a data room you mentioned partner are there what are some examples if you're not raising money from someone but like you met like are there examples of like a partner that would need access to a data room yeah so a data room for a partner might look pretty different so for example you know let's say that you are working with Microsoft or somebody like that as a partner or or if you have vendors you know then then you may need to supply information like tax forms or something along those lines so that would be another form of a data room it would look very different from an investor data room if you're going through an acquisition or at some

5:20 point you have plans to be acquired or something like that you will need a data room and so I think data room every like when I was an entrepreneur I thought oh gosh data room that sounds super scary like you know it sounds very complicated but really a data room in in short is an area where you can put a whole bunch of files and you're going to share out that link to a whole slew of folks and it's actually very helpful to you as an entrepreneur because then you don't need to you know do this prepare the same docs over and over if you just prepare it once then you can share that link with a whole slew of people and just be done with it so so that's really what it is in in short what about so you see you have 400 portfolio companies here to do 100 deals this year that means you're seeing thousands of companies like what percent if you had a if you had a benchmark it what percent of folks don't have a data room and then I guess like what are the consequences of that like will you not invest if someone is it fair to say you're not going to invest because someone has a data room

6:24 but you might not invest if they don't have one yeah so when we make offers I would probably say over 90 of the time the company has not yet prepared a data room and we as a firm cannot send the money until they prepare the data room so if you don't yet have one then it means that there's a bit of a delay because even if an investor makes you an offer and specifically VCS Angels may not care but VCS that they're making you an offer you know VCS have to go through their audits and they are scrutinized by their investors who want to make sure they're investing in legit companies I think many of you may have seen some of the scandals of somewhat recent Fame where you know VCS may not have collected that information that's coming back to bite them so so that's why VCS asked for a data room and so we won't send you the money unless you have one yeah awesome and so but it's not a big deal if you don't have one by the way

7:25 you can create it and get access to it it's going to slow things down but like don't panic thinking you need to go create one like this second I think that's probably yeah absolutely yeah awesome did you know where the term came from I I actually learned this like yesterday by the way I didn't know where the the word data room came from no where does it come from it used to be like I mean I'm talking way back and forth computers if you're like doing an IPO or financial documents they would put you basically like in a in a vault like a secure room where you could look at confidential documents oh wow yeah so it came back from like issuance way back in the day and that became virtual data room data room which I thought was which is interesting talking about like must-haves so yeah we launched ours two weeks ago but we've actually had a couple thousand folders and files already uploaded to our data room products we're actually able to infer some insights already the top five things that we see are legal and corporate documents your financials

8:28 your team your cap table your Market data and I'd say number six on here would be product like screenshots video the products some sort of product item kind of looking at this list is like what are some must-haves for a data room and and and how does that change from pre-seed maybe to see to see like how does it does it evolve over over time yeah so again it depends a lot on who the investor is you're talking with that's probably the most popular case for a data room talking with an investor and you'll need one if you're talking to an angel they may not need really anything it's their own money and nobody is auditing their own money so for example when I Angel invest I never ask for these things but as a firm I definitely need to because our firm is audited and our Auditors will literally go through every single portfolio company and we'll check to make sure is this a legit company like you know have they incorporated or are we just sending

9:31 money to people's personal bank accounts stuff like that so at the minimum firms will ask you for number one here like incorporation docs where are you Incorporated are the founders working for the company do you have employee you know plans contracts that you've signed is the IP that you're creating at the company assigned to the company or can you have some Rogue employee leave with the IP tomorrow and start a competitor firm so so those are the kinds of docs we're talking about in category number one like basically do you have a lawyer at this stage who has helped you with basic formation docs and I know that everyone here is from literally all over the globe but I would say that you know for those of you who are working for with Silicon Valley law firms or are based in Silicon Valley and have been connected with law firms around here I think probably they're creating starter documents that will all check out just fine for number one a flag here though

10:35 is for those of you who are outside of Silicon Valley and you found some lawyer if your lawyer is not very experienced in working with startups that can sometimes be a problem they might be able to help you incorporate the company but often I have seen actually you know they're missing other pieces around let's say IP assignment or vesting schedules or shareholder agreements or things like that because they're just not used to you know startup startups in general so so that's just something to flag and there are a lot of Silicon Valley law firms that will give you sort of free advice before you start paying them like you know maybe one free call or whatever because they're looking for new clients always and so my advice to you if you're outside the Bay Area is I would probably try to find a firm that does give free advice just to have a lawyer take a look at what you have if you've already Incorporated and stuff and make sure that everything's sufficient and if it's not buttoned up you may want to consider either immediately or at some point down the road switching because there's often a lot of cleanup legal stuff that I see

11:38 especially with our companies that are based outside of Silicon Valley so that's just one thing to flag about number one I think for things around number well number three I've kind of addressed like that gets Incorporated you know with employee agreements and stuff into number one number number two financials like you know we invest in pre-seed companies so very hop-in companies don't have any Revenue so we don't dig into that but certainly as you get up towards let's say series a a lot of investors series a investors will ask you for financial projections certainly what are the financials you're doing now if you're making any money and if you have any expenditures and so I think my general advice here and we can talk more about this later is I would keep it very light because I think the more information you have especially around projections the more that people can nitpick at and that's a reason to pass and then for cap table I think a lot of investors will ask for that I think in particular what people are trying to ascertain is how clean is the cap table so especially outside of Silicon Valley

12:44 I sometimes see advisors you know take half of the company before it's even gotten started and that's just not standard for what most investors are are looking at or interested in because we want the founders to be incentivized to run the company so that's pretty much what people are looking at for the cap table and and number five I think that's sort of a nice to have yeah awesome you mentioned some advice any other any other red flags one that comes to mind is if you do have financials or data in your data room but it doesn't match other content you create like your pitch deck that you used originally that could be a red flag yeah things are not lining up any other Red Flags that you would call out if you have contracts that are signed you'll want to put those contracts in the data room and especially so this now I guess we're talking about companies that might be seed stage and Beyond and for those companies if there's any discrepancy there like it's not completely signed or it's pseudosigned

13:47 or whatever and it is different from what you claim then that's going to be a red flag as well awesome yeah and then we'll make sure to send this out but this is a a checklist that the hustle buns put together for data rooms so we'll send this out they've made this available and you can check out some of the other items that you have in here oh it's about I saw this actually this morning I was previewing today what about like board consent and board minutes I mean that's probably later stage comedy that have a board like what what would you expect for in terms of board consent or board minutes to put into the the data room for our pre-seat company we don't care about it and our checklist is actually way more exhaustive than we care about but if let's say you're coming up on the series a that is going to be important if your board in particular is is more than just you as the founder so it depends a little bit on your board composition like let's say your board has an external person like an investor or you know some Mentor or somebody then you do want to have all your board notes

14:52 and minutes you know documented and kept in a folder last question we could come about we will move on to the next slide is there anything that would excite you if you saw it in a data room or are you already at the point of excitement you want to invest in the company so what is in here now is not necessarily additive to my investment decision I can tell you that that already prepared like and by Clean what do I mean I just mean organized like folders that are labeled properly like I don't know maybe there's a folder for incorporation docs folder for you know employee agreements folder for partner dreams or whatever it is that's impressive to me in itself because the vast majority of companies like I said more than 90 that are run across especially at this stage have no data room so I think if you have a data room that's organized it's also a reflection of you and that looks good like the reflection is oh this person's organized oh this person you know is

15:56 buttoned up and is detail oriented so I think that's sort of the unspoken thing like okay yes part of it is about the content that's actually in the folder but I think the other part about it is just the attention to detail and how does it reflect as you on you as a founder yeah I think this is a quote that I also in this other blog post at the hospital phone crew put together around why they're important but I think you mentioned that as an investor you can expect that the way Founders keep track of their documents is reflective of the way they run their companies I mean we've for sure have seen that play out with the other side of our business with investor updates if you're sending investor updates out that reflects on how you're running your company and so yeah this I think really resonates with with me as well we should have well organized like data room like would you expect a cover letter or any other document just like a readme just like hey here's how things are laid out

16:59 or it should be simple enough where you can poke around and kind of understand what's what's happening within the room itself either or actually I think a readme is a great idea because over time your data room is going to have more stuff in it and so you know if you just update the readme and maybe have links to various things then that would be super helpful I mean I think data rooms in general as a Founder I used to think oh this feels like busy work and like it's just extra stuff I need to do that's not relevant to my business but the reality is actually it's a good process for you as a Founder where if you do it once then you can send it out super easily to so many people and especially if you're thinking about raising money and if you are raising from many investors or rather you're having a lot of investors look at your company then it is way easier to just send out one lead link than to try to attach files left and right every single time to your emails and send them to investors so so I do think it's like a actually a way to to create better processes within your own

18:02 company yeah personally I mean I've tried to have this idea for for myself but like you're always on data rooms that at any time I needed to raise money or sell the business or do something everything's already there and I can just just send it it's even useful for not that like I found it just throughout the year you'll deal with things as a Founder whether it's recently tax or insurance or any of the other kind of operational back office type stuff a lot of that stuff's in your data room that you just pull out like bylaws you need bylaws for something and so I just it's it's really helpful to be organized it just makes your time more scalable as well so that's a that's a plug on just like the day-to-day of having a data room set up a hundred percent yeah we talk about sharing like I'll link share it out let's talk about when you know you're going through a fundraising process is this something I'm gonna do once an investor says

19:06 here's a term sheet we want to go to your data room are you going to share before the term sheet because they want to understand something else about the company before they make an investment decision like how do you think about using the data room as a vehicle for ultimately getting a a the check wired into the business yeah I think my general perspective on fundraising is I I wouldn't over share so I wouldn't be cagey about information but I also wouldn't overshare because you know at this in startups like nothing really looks great for the most part and so the more you overshare the more you might scare somebody away but certainly if somebody is asking you for your data room I would just go ahead and send it at that point in time or if someone asks you you know hey not even necessarily your data room specifically but like hey you know can I look at your contracts that you've got signed then you can send that link over right or maybe the link

20:10 to the folder in the data room on contracts or something like that so that's how I would use it I wouldn't proactively after a meeting say oh here's our data room because you might be opening a whole can of worms that's unnecessary but investors will ask you if they are really interested at some point at least VCS will Angels may not yeah and what what people should I expect to share my data room with like am I going to share it with you Elizabeth or will I share it with Associates in addition to yourself like who should I expect sharing my data room with at Adventure Point it it really depends actually on the fund certainly I think for the larger funds my guess is that Associates probably go through all that not having worked at a large fund I wouldn't actually know but that's what I would guess like somebody who is checking the boxes to make sure this is a legit company Etc you know at hustle fund we have a a system where we ask Founders to submit their data room and and then whoever's the lead you know investor on that just

21:14 does like a very cursory check to make sure the things that will be asked for by our Auditors are there and and that's it so so I think again stage wise and also the size of the firm matters a lot in terms of what they're looking for in the data room we're at precede so there's not going to be a whole lot there but we need to know that we are investing in actual companies rather than people's bank accounts yeah awesome let's get this in Q a and let me pull up the questions we have here thank you for starting to write some of these in first question your appreciate investor do you help your current portfolio companies put together a data room for for future rounds or offer any guidance with current portfolio Founders that might be raising their their seat round we help our portfolio companies with fundraising in general I think we spend most of our time helping them with the storytelling of their blurb and deck and we also do introductions to investors I

22:18 I think my general thinking about data rooms is everyone should have one but you don't need to spend too much time on it so we don't spend a whole lot of time on that and especially at this stage where we are even the stage after us where our portfolio companies are you know maybe raising a seed round or seed plus round the data room is still fairly light so I think the short answer is no we don't really spend a lot of time in helping our companies with their data rooms but we help them with fundraising in general and usually the parts where people get more tripped up yeah we had a participant right in hi I'm conversations with Venture firms right now some of the asking about the culture of our startup should that be included in the data room if yes where and if not what would be the appropriate way to talk about the culture of your startup the culture wow I've never heard that one before so one thing I would flag that is something that we add to our

23:21 that we've added to our checklist which is I I think an interesting area is let's say that your company has been in litigation or you know has been accused of something or other or if a Founder has been accused of sexual harassment or things like that those things might be questions that come up from potential investors so I I think I I don't know if this culture question is related to any of this or whether somebody just wants to know like what is the culture of this company in general but those are things that you should be prepared to answer if you have had any of those sorts of issues or something you know something along those lines that investors would care about and I don't know if you want to preemptively put that in a data room but you should at least have those materials prepared for yourself to send out to investors in case you get questions about it yeah what about culture in terms of Mission Vision Values and having those

24:25 you want to be aligned with investors as it relates to your values is that something that would be teased out before you you send a data room or helpful to include you know I've actually never seen that in anybody's data rooms and I've never heard any investor ask that before so this is an unusual ask I would say Okay we talked about some of the documents we we highlighted earlier do you share all of these voluntarily or each section just only upon requests so like if someone says Hey I want to see your corporation Docs send just those or send the data you have set up I mean I would just send whatever is asked so it might be a link to a subfolder within the data room but if somebody's asking you hey can you send me your data room in general I would send them everything yeah what about customer references and referrals demonstrating customers how much customers love your company that that's a question that a lot of investors will ask and

25:30 here's the tricky part you know if you're pitching a lot of investors which you probably are a bunch of people might ask you for that and you know even if you have awesome customers none of your customers are going to love doing like five calls so how do you kind of navigate that so here's what I would do like number one I would actually just be very direct with an investor asking me that and say you know hey would absolutely be happy to introduce you to a customer or two or whatever however as you can imagine we are pitching a number of investors and other people are making that ask and our customers can't be inundated with so many investors calling them all the time so I want to make that the very last step in the process and so I want to make sure that everything else checks out for you and that you are fully committed pending a customer call and that we get through everything else so that way we don't annoy these other people I would just be very direct and honest with them so that's sign

26:32 number one thought number two I think it's also perfectly fine to to phrase it as you know well so I think your ideal is to to connect your investors with one-on-one calls with your customers you know whoever's there at the very end however if you still feel like gosh I only have two customers and now each one is going to get 10 calls another thought is to try to do a group call but I would be very careful about doing a group call because you don't want your investors to know who the other you don't want the prospective investors to know who the others are because then they may end up you know colluding or talking each other out of the deal or whatever it is so I think if you do a group call then you have to be very careful that in the group call like everyone can't see who everyone else is they can ask questions but they can't see who else is on the call and stuff like that so so that's another option so

27:35 that way your customers are not inundated with so many calls dude what about yeah that's really interesting what about if you would some of the the pre-work of just if I recorded a loom or a zoom with like a customer on a customer call and including that in my data room would that help alleviate some of that time you're taking from customers assuming investors okay watching that 100 the only thing I would say about that is you know your prospective investors may have different questions and and also again you don't want to like send over an hour-long conversation with your customer either or do you want your customer to kind of you know talk too much right like if let's say your project is Half Baked but it's still useful to your customer and your customer talks about how it's happening that might also work against you so I think I would just be very careful with that like maybe another strategy is you know hey I'm gonna field all the questions from investors send it by this date and then your your customer can record the answers and then you can cut them up and then send out the video

28:39 Snippets to all of them so that's another way to handle that but yeah like that's that that's some work for everybody yep let's see we got a ton of questions coming in let me see if we can start filtering some of these let's see what's a good one here do you suggest that PC companies have things like Insurance and audit and financials when raising a pre-seed round for a pre-seed company probably not audited financials I think I I imagine you're you're not making that much money to begin with and so I suspect that your investors probably believe you but I I think it also I say that cautiously because I think it also depends a bit on geography like if you're raising local investors and you're outside the valley I have certainly heard preceded investors ask for all kinds of things and but I think

29:43 the the honest answer is I would probably not spend the money doing all of that at least At The Prestige stage yep should you ever be concerned about getting access to your data room for investors that you don't know well but have asked access to your data room I I'm not sure I understand that question is it somebody that you're actively pitching or are you we'll see if this person writes back in and I can get some clarification on that one let's see should I ask for an NDA to get access to our data room no no VC will sign an NDA there we go that is super easy what else do we have here how about some House of fun questions I got a couple of those now coming in all right how much of the company percentage-wise does hustle Pawn take for fifty thousand dollars so basically they're asking probably valuation range here for the types of companies you're you're backing yeah it really depends a lot on the company the stage the geography the space Etc I think the short answer is if we are the first ones to the table and

30:48 no terms are set we'll and we want to make you an offer we'll make you an offer and then we'll we'll just discuss with the founder directly whether that's something you want to do or not so I think you know unfortunately we're not we're not an accelerator so we don't have standard terms and our terms are literally all over the board because you know companies have all kinds of situations what's the highest valuation and lowest valuation you've ever done are you comfortable sharing that yeah sure the lowest was 250k post and the highest was 32 posts okay so there we go there's there's your there's the range you can you could work off of I can't I would so I think giving more clarity around this I would say if I had to guess and I could pull up the data probably 90 plus of our companies are somewhere between three and seven post depend but it depends a lot on geography like certainly Silicon Valley prices are a lot higher and then certainly if you're outside the US it's a lot lower yep

31:53 should we include previous investor updates in our data room you could but I feel like that's a nice to have yep what other questions we got here oh we got someone she wrote back in about the question of sharing with someone that I do not know well yes actively pitching investors they just don't happen to know this semester well would you have any concern sharing a data room if you're actively pitching you don't know the investor well I don't know how many calls you'd have but you guys make a decision pretty quick so I might not know you super well yeah through my data room and and that's what I actually this is that's exactly it you know I think especially a precede and see the way fundraisers tend to go is you know you might do one conversation or a couple of conversations with an investor and I would say you probably don't know that investor very well at least I would not consider that to be knowing them well

32:56 including ourselves we make a decision typically after one conversation but I think the reality is if they're going to be an investor in your company you know they are signing up to essentially be a partner to you so you have to make a decision as a Founder if if someone makes you an offer like whether on a gut feeling you want to partner with this person or not and that includes everything your data I mean the data room is the least of your worries if they are a bad partner like they can make your life miserable in many ways like somebody can call you up every day every minute right like there are all kinds of ways people can be annoying to you that have nothing to do with your data room so I think there is a level of trust that has to happen in fundraising and that's you know that that is what fundraising is about like both ways you know there's certainly plenty of Founders we have backed where you know they were not who we thought they were and that's a whole nother conversation putting my founder head on

33:59 I would say if you're asking the question because you have a a bad feeling or a red flag about the investor that probably says enough where you might not want to share the data room with them if it's simply I'm just getting to know this person I think it's probably very safe if you're sharing you know what we talked about today ultimately they should do no harm to you if they're if they're backing you and just along those lines if your Spidey senses are like I don't trust this person I think you should end the process right there like never mind the data room just like you know just like cut it off like you you don't need to take somebody's money yeah what about speaking of you know just different aspects are there if you're putting kind of on the flip side whether would there be things investors are asking for that would raise your Spidey senses or red flags putting your your Founder Hat on as it comes to this part of diligence yeah I think there are two categories of [35:03] you know spidey sense issues with investors one is okay this investor may be a good person and this person you know might might be honest or whatever and trustworthy but this investor is just a pain in the butt and is asking me for so much stuff and so much homework and all that that's one category of investor and that's probably the vast majority of investors we the other category of investor is I really don't trust this person at all like this person seems like a creep this person seems like they are spying on my company to try to get information for somebody else's company or something like that right like this person I don't trust them so they're kind of two categories of like I don't trust this person that's a that's one group and then there's a category of this person's just a pain in my side so I think if you're in the category of like oh I don't trust this person I don't know why but this seems like a bad person cut it off if it's like the other category which is a big category because there are a lot of investors especially

36:05 outside the valley who ask for a lot of homework then I think you have to make a call as a Founder like I would never advise my portfolio to say no and cut it off because sometimes you don't have a choice and you really need the money but I think you should just go into it eyes wide open like okay this person I might need to manage my time with them because they may constantly be calling me about stuff and I think the way to manage that is just to be like very direct with them and say you know hey would love to help you get to where you need to and get all the information you need but you know I am running a company and so I I want to make sure that we're using our time in the wisest way like get me all the full list of things you need let's get you your get your questions answered and and then you know let me know whether you're in or out so I would just like manage them very well if they're in that category yeah for for the people that kind of drag out diligence or

37:08 getting on multiple calls is that ever like a signal to you like oh this person's really not gonna invest but they're just trying to find a way they're trying to find a way not to invest like is it ever a signal or are some people just that needy when it comes to getting on multiple calls diligence things like that yeah I'd say probability wise they probably will not come in but I've seen it happen like on rare occasion and so this is this is where I think probability wise you're you're probably gonna waste your time and this is why you need to manage that time really well with these people because it it like it's probably not the best use of time you're probably gonna waste it yeah all right we got seven minutes left maybe I have a ton of questions which is great if you don't get to all the questions we'll try to shoot you guys emails I have this all we have this written down on or you just email me and I'll do our best to to get it and answer your way there's been a lot of questions about [38:11] which like provider to use for the data room I hate doing this because it feels I will plug visible for one second just because we've just launched it so we did build the data room product it's pretty amazing we've talked to hundreds of Founders and it lets you really understand one our investors view my data room to make it dead simple to update documents that already exist and it all integrates with the visible platform if you are fundraising but like I was against some of my ethos so you could also use notion you can use Google Drive you could use a zip file and attach it I think there's plenty of tools you could use out there for your data room product but I would I would hate since there's like five questions about it not to to at least mention visible are there any like tools Elizabeth that you would say like you would not use or are you comfortable just as long as I see structured folders and organized that's all I care about yeah that's all I care about yeah

39:16 great what about kind of related to updating documents say I have a three-month fundraise I'm starting in June you know it's now March should I continue to update documents in my data room or leave them as is from when I started the race that question came in you should definitely update them because let's say you pitch me in June and I see you know your information only goes up to March one it doesn't reflect well on you as a Founder but two also I start to wonder because the messages are very skeptical people I start to wonder like oh gosh did the business just totally crater in March and they didn't have any sales they didn't have any new things happen like a March was their best month that's how investors think about things so I would continue to update it I don't think you have to go crazy and update it every day or even necessarily every week but you know if if your raise is going on two or three months you should yeah don't put the don't put the date of the the when you made the deck and the

40:18 deck name too that's that's another dead giveaway just just delete that when you're when you're raising money there's two more good just fundraising related questions and you're such an expert oh I would love to get these before we wrap up Rachel wrote in should we share most favorite Nation caveats up front when raising money from new investors I'm not sure I understand that question Rachel if you're sitting here to elaborate some more what is your view on a venture investor that's already invested in a close competitor is there too much risk to proceed talking about fundraising and starting to give access to the day room yeah so this is a good call out and this goes back to is somebody just trying to look at your information to spy on you or are they legit interested so I I would just actually ask them in a nice way I you know I would just ask them you know hey I noticed that your investor in X just kind of wanted to get your sense of whether you feel like it's too close or you know whether you you

41:23 know this is something that you you would seriously be able to consider something like that just be very direct about it because I actually have seen you know especially for investors who are specialty investors right like a fintech investor an edtech investor of course all of your Investments are going to be somewhat close they're all in the same category so but even for generalists like you know one of our portfolio companies raised from Sequoia and they had a a portfolio company that we thought was pretty close and we you know our portfolio company asked about it and they they did the investment and it turned out not to be too close after all yeah so we got a little bit of elaboration we had an initial investor for pre-seed they had a most favored nation terms on any future rounds should we let other investors know no I don't think you need to unless you're asked about it but what it means for you what that essentially means is like let's say that you raised from a future investor and the terms are now worse than before just

42:29 for everyone to know what makes most favorite Nation Clauses mean is that investors who have that in their documents get the best terms that are out there going forward so that means that if you thought you raised at a five cap and now your evaluation has dropped down to three the people who were at five have also now dropped down to three so that's just for you to know now the way that I would play that is let's say that a newer investor comes along and says I would do this at three I think you can push back and say you know we we have an mfn with prior investors and that will you know cause everyone to go down to three and unfortunately we wouldn't be able to do that like you could say something like that but I wouldn't preemptively bring it up unless it's something that you know comes into play yep oh this is a this would be a maybe a hot take question so we'll end here do you think startups should be burdened with providing ESG policies in their data room and implementing these in their operations I'm assuming this means that investors are probably have some

43:31 sort of ESG component to their thesis and are requiring it as my guess like should startups have to put those in in their data room is the is the gist I'm getting from this question yeah this really goes back to who you're raising from the vast majority of VCS especially in software don't have anything like that or any requirements and so I would say no that being said like let's say you're investing from a bunch of let's say Impact Family offices or something for your climate idea that actually may be a very common ask in which case I would put that in there so it kind of depends again and I think I would start with not putting it in there but then if you start getting that request a bunch then put it in there and then you know you'll just have that in your process yeah there we go last give us a state of the union on on the current fundraising Market 2021 you know was was pretty insane for Founders and I think in a good way what are you seeing now this year like terms we haven't seen before or

44:33 haven't seen in a while from from ambassadors Downstream from you guys like where where is the market today I think for preseason dropped and it's her but I wouldn't say it's crazy on any front like with it's not crazy bad it was just always hard to raise I think for most people so if you're in pre-seed seed I wouldn't worry about it again it always comes back to like you know is your company in a good spot to be fundraising obviously pre-idea or pre much of anything is always hard I think if you're coming up on your seed Plus or your series a and Beyond it is really hard and this is where you have to be super buttoned up your deck story has to be nearly perfect your data room should be nearly perfect like and you need to run a very tight process of meeting lots of investors Frankly Speaking I'm just really not seeing a lot of institutional investors invest at the series a and Beyond a lot of them are very concerned about their own portfolio companies that are already in their portfolio

45:36 so most of you know our best companies if they are raising tend to be raising from insiders at that stage and Beyond just to get them to Q3 or Q4 or to be able to go back out to the market so if you don't need to raise right now and it's easier for you to make money off of Revenue or consulting or throw events or whatever it is I would probably do that and I would come back to the market in Q3 that's my general advice to our own portfolio what about okay last question now that you said that pre-seed seed you said a little bit more deals are still getting done if I'm thinking about my raise should I raise more money than maybe I would have knowing that like the downstream investors are just not doing deals or they're taking slow like should I should I give myself more cushion if I'm raising a pre-seater seed round my general perspective is to try to raise money when it's easiest and I know it's never easy but I would say now is not a great time for easiest for all you know parts of the stack because

46:40 appreciate and Seed although deals are still getting done they're super slow it's like it takes twice as long as let's say you know this time last year so if you're now thinking well instead of raising half a million I'm raising a million because I want to make sure I have extra buffer it it might take you until like August to raise a million bucks I'm not saying it will there are certainly companies that are getting it done faster but I'm just saying like if you used to take four months to get something done it now takes eight so you might as well just like bring in whatever you need to get you through to August and then go back out and raise again rather than spinning your wheels right now with you know your early story your early traction right now yeah well we'll end it there Elizabeth thank you so much for your time thanks everyone for joining this is our our highest registration event ever you can see why Elizabeth has a ton of amazing insights thanks to you for sharing those with us thank you for the questions again we had so many that we weren't gonna be able to get to all [47:43] so if you look my email is Mike at visible.vc feel free to email me I'll try to answer it or find someone smarter than me to answer it for you thanks everyone see you soon thanks so much bye