In this article, I want to talk about the VC investment process to give you an idea of how the investment process goes on. There are some steps that can be different depending on the VC.  First of all, a quick note about the fund life and investment period.

Then, in the first year they might cut their first cheque to 6 companies, similarly 6 new companies in the second year followed by 6 new companies in the third year and remaining 7 in the fourth year.

Now, this doesn’t mean that the fund has exhausted all of its capital in those 25 companies. Depending on the fund strategy about 40%-51% of the total committed capital is invested during the investment period.

The remaining capital is reserved for follow-on investments in the same 25 companies. The funds do so in order to maintain their equity position in later financing rounds. Not all 25 companies are going to get follow-on investments, only the ones which show growth potential tend to get follow-on investments.

So, if you are a founder and you approach a fund that seems like the perfect fit for your company in terms of alignment with the investment thesis of the fund and you also have the apt KPIs and the fund says no then there is a possibility that you approached the fund after the investment period is over. 

Of course, there can be other reasons as well.

Now let’s get back to the investment process starting with the pitchdeck. The objective of your pitchdeck is not to get an investment decision from a VC straight up but to grab their interest and get a meeting with them.

Depending on the firm size and structure, you might be contacted by an analyst or associate or in some cases even the partner for a call. The VCs prepare an internal document which is regularly updated with details about your company and also minutes of the meeting.

After the initial meetings, VCs will use some factors to screen your company and can either reject or invite you to their offices to pitch on a Monday. The figure below shows broadly the screening pointers used.