Ask a VC Who Has Invested Through Three Downturns, "What's Next" with defy VC

3. A little about Neil…
● Born and raised in Silicon Valley by immigrant parents
● 23 years in venture capital
○ began career coding then joined Goldman Sachs
● Venture investor through 3 downturns
○ 2000-2002 4 years: CMGI, corporate VC (AOL, TimeWarner)
○ 2008-2010 12 years: managing director at
○ 2022-2023 7 years: founder and managing director at
● Generalist with a focus on SaaS
○ Director on board of over 40 SaaS software companies over career
○ exits:

4. VC Capital Raising is Dead (or at least on life support)
● LPs have to triage – make
hard decisions
● longtime managers raised
too much capital
● too many first-time funds
and inexperienced managers
raised new funds
● The painful shake-out is
happening all around us in
real time
● it is hard to see as it is
purposefully opaque

5. Behind the curtain: what is happening to VCs in this market
Psychology
● partners are distracted
● general malaise
● licking wounds
● Woulda, coulda, shoulda Younger partners
● leaving or being let go
People aren’t focused on new deals
● first priority is to help companies in
their portfolio, that can be saved
It’s not you it’s me
● partner pacing, it is harder to get deals
through
● where the fund is in the life cycle
LPs selling positions
● for capital
● undue pressure
Expense pressure
● as time passes, decreasing fees

6. VC Investing through downturns: 1998-2023
● It took 17 years to get back to
the dollar amount invested in
2000
● The recovery was swifter after
2008 but from a lower starting
point
● The amount invested in 2021
was obscenely large and will
take time to work through the
system

7. Increase shots on goal
Normally you meet 20 firms, now you meet 100 firms to see the
same amount of active and interested investors
Research who has capital
Many funds won’t exist, when did they last raise capital?
Identify the right partner fit
Who has relevant experience and “open to buy”
Manage business tightly
Show ability to make hard decisions
What entrepreneurs can do immediately

8. Use multiple tools to get the attention of VCs

9. (Re)positioning for SaaS
● Rapid grower - raising the bar
○ Growth of 200% > 400%
○ Growth is an important metric, growth rate depends on size
● Capital efficiency - will there ever be profit?
○ Economic model: what are the underlying economic metrics of the business
○ Round size expectations: median A-round is now 7M, down from 12M (source: Carta)
● Traditional SaaS metrics - on steroids!
○ High margin - 80%+
○ CAC/LTV - 3x is now 5x+
■ Payback period is now better (LTV made up / cash constraints into calculation)
- sub 12months
■ Payback - fully loaded acquisition cost + cross profit (sub 12months is great,
sub 6months exceptional)
■ Churn - generally net negative
■ Have organization for Account execs to ramp? Enterprise/field reps?
■ ACV - 10K no, 100K+, or PLG, Self serve
● Consider new technology trends (AI) and how they drive efficiency
Source: Scale.vc

10. VC Investing through downturns: 2014-2023
● Reasonably stable through
2017
● Significant uptick between
2018 and 2021
● Rapid decline post 2021
Source: Pitchbook

11. Garner empathy from distracted
VCs for your SaaS Business
● Business Development
○ Can you do a logical and helpful partnership or BD deal with the VCs own portfolio company
■ Immediate awareness
■ Ease of reference
○ Portfolio company became a customer (customer CEO reference and/or direct referral)
● Know your competitors
○ Pricing, customers
○ Have a why we win answer clear
○ Be respectful
● Research the partner who is really a fit, and be open to associates
○ I get 20-30 spam deals per day, it is obviously all trash
○ If someone writes a short crafted note with information on their past company, have a friend in common, shared alumni, etc….
There is a higher response rate from investors
○ Associates exist for a reason and have the ears of their partners, unlike most entrepreneurs, unless they are in their portfolio
● Angels
○ They are a source of credible deal flow for VCs
● Industry conferences ( )
○ Opportunity to meet with a VC before or after, be sure to reference their material; neil@defy.vc

12. Tips and Tricks
● If you were part of a team on a successful exit, even if
you were not the main point of contact, you should
reach out to investors and reference the exit
● Quarterly/monthly news - put everyone you have
ever met on your newsletter!
○ Reminder
○ Top of mind
○ If quarterly, nobody will unsubscribe
○ Takes time to get people comfortable
○ Shows effective communication and transparency
● Become one with
○ Search competitor job openings: take their number of
sales reps x 500 = booking plan (source: Jason Lemkin)
○ Constantly create content, build a following; on
Linkedin AND off (source: Chad Rubin)
○ Find someone in your network who can make an
introduction
● Kids / school / extra curricular activities
○ A casual and relaxed atmosphere to get to know people
● Other activities
○ Sailing, cooking, golf, tennis, ball games, etc.
● Sending Deals
○ send a VC a friend’s deal that you have conviction in -
VCs are in the deal business!
● Function expertise
○ Offer your expertise up to VCs for due diligence

13. Key
Takeaways
What tips and tricks can you share with entrepreneurs about how you uniquely
created messaging or got a VCs attention?
Consider what the VCs are also dealing with in
this downturn behind the curtains
The bar is raised on SaaS metrics
Find ways to get your VCs to understand you
and your business better
Think creatively about how to get investors
attention
Q&A and Knowledge Sharing

14. Thank You