The last step to raising venture capital is normally a 1 hour pitch to the whole partnership during their weekly monday meeting. This is often described to entrepreneurs as a formality, but at least in my experience, for early stage deals, I would say there is probably a 25% chance of you getting a term sheet afterwards and a 75% chance of you getting rejected (although it will rarely come in the form of an actual “no”) .
The reason the odds of you getting dinged are that high are:
1) In most VC firms all it takes is one partner to say “This is really stupid – I hate it” to kill a deal.
2) Although by the time you pitch, the lead partner has probably told the other partners about you and probably sent around a memo, the non-lead partners probably didn’t pay attention, and only really do when you are presenting.
Good VCs have a much lower post-partnership ding ratio, because they work hard to socialize a deal and really get their partners to focus on it before asking the entrepreneur to present. For example, I used to work for Rob Stavis at Bessemer and he had a much lower post-meeting ding rate. This was because he spent a lot of time talking to his partners beforehand (”socializing the deal”), and if they had good objections he got them early on. (Ps. Hopefully the VC will work extra hard to pre-sell the deal if they ask the entrepreneur to drop everything and fly across the country.)
The very worst thing that can happen in a partnership meeting is what I call the “partner ambush.” Basically this is when the partner who brought you in (the “lead” partner), who you’ve met with for many hours and fully understands your company and is excited about investing in it, realizes midway through the meeting things are going badly and decides to try to save face by turning on the entrepreneur.
I had this happen to me when I was raising money for my last startup, SiteAdvisor. Basically what happened is me and my co-founder Tom Pinckney walked into this big, well known VC firm at 4pm to a room of very tired looking guys (yes, they are all male) who had been hearing back-to-back pitches all day (side note: always try to present in the morning). No one introduced themselves or said hello, which was a bit unnerving. The first questions were clearly hostile to the very idea of a consumer security startups (for a bunch of bad reasons, most VCs vastly prefer enterprise to consumer security – especially on the east coast and back in 2005). One of them literally laughed at the idea of marketing via search engines (this is the east coast – believe it or not many VCs our here still don’t know what (white hat) SEO is and how important it can be). Then the partner who brought me in said “Well, Chris, why not make SiteAdvisor into an enterprise product” basically turning on me and the whole concept of the company. Things went downward from there. To add insult and injury, the lead partner never even bothered to call me to ding me afterwards – in fact I haven’t heard from him to this day.
In retrospect, that would have actually have been a very good investment for the VC if they had actually given our pitch a fair hearing. Which gets me to my final point: I think VCs are making a mistake by putting so much emphasis on the partnership pitch. There is some positive correlation between presenting to a room full of (sometimes hostile) VCs and building a successful startup, but not a very high one.
Besides missing good investments, the emphasis on the partner pitch leads VCs to invest in bad companies. An investor friend of mine was recently talking about a failed startup he invested in:
Toward the end of the company, when things were going very badly, I went in and spent a day sitting with the entrepreneur and watching him work. At that point I realized his one skill in life was pitching investors. He had no idea how to manage people, build a product, get stuff done, etc.
The current early-stage VC process is optimized to favor people who are good at pitching partnerships, not necessarily people good at creating successful startups.