Investor Meeting

What is an investor meeting?

Investor meeting (German: Investorengespräch) refers to an appointment between the management of a company seeking capital and a potential investor, in which both sides assess whether an investment is an option. In a funding round, several such meetings follow one another, from the first meeting through in-depth appointments to the partner round, in which the investor decides on an offer.

Investor meetings are the core of every equity round with venture capital funds, growth investors, family offices or the investment arms of corporations. On the company side they are led by the founders and management, on the investor side first by members of the investment team and later by the partners, that is, the people who decide on investments within the fund management company. The basis is the pitch deck and the financial model. The meetings do not commit either side to a deal. The term sheet, the outline of terms of the investment, is in its economic terms usually non-binding; only individual clauses, for example on confidentiality and exclusivity, are binding. The investment itself is agreed only in the participation agreement.

The stages from first meeting to partner round

First meeting

The first meeting often lasts 30 to 60 minutes and frequently takes place by video. The investor checks whether the company fits its profile: sector, business model, maturity, round size, its own investment amount and possible overlaps with existing portfolio holdings. The company in turn checks whether the investor can carry the round and how it decides. The meeting ends with an agreement on the next step or a rejection.

In-depth meetings

In one or more follow-up appointments, the focus is on figures, assumptions and execution: revenue development and cohorts (customer groups by start month), the sales process, customer acquisition costs, product architecture, competition and planning. A product demonstration, conversations with further managers and first reference calls with customers are often added. With a first list of requested documents, the review begins, often before a term sheet exists.

Partner round

In the partner round, the company presents itself to the partners of the fund management company, who decide whether to offer a term sheet. The investment team has previously brought the case there and continues to represent it. If the outcome is positive, a term sheet follows. Depending on the fund, the formal investment decision is made by an investment committee, often only after completion of due diligence.

Between the stages, the investor decides internally whether to continue, without the company being present. The investor's contact person must therefore be able to retell the company's story on their own. What the contact person has not understood is missing from the internal discussion.

Preparation and course of an investor meeting

Preparation begins with the investor. To be clarified are the investment focus, the usual investment amount, the share of the fund's capital already invested, reserves for follow-on rounds, the decision path and holdings that compete with the company. Conversations with founders from the investor's portfolio provide insight into how the investor behaves in difficult phases.

The investor has the pitch deck before the meeting so that the conversation does not begin with an explanation of the business model. In the meeting, a short introduction is usual, followed by the discussion, which takes up most of the time. It is agreed in advance which next step the company wants to reach, for example an in-depth meeting with a partner or access to the data room. Information that could harm competitors, such as customer names with terms, is held back in early meetings, because at this stage investors rarely sign confidentiality agreements.

Typical questions in an investor meeting

The questions in investor meetings repeat across sectors. They can be arranged by topic:

• Financing: runway of the existing funds without the new round, round size, use of proceeds by area, participation of existing investors in the round and the current cap table, the overview of who owns which shares.
• Revenue and planning: derivation of the revenue plan for the second and third year, development at half the growth, share of recurring revenue and churn rate.
• Customers and sales: revenue share of the largest customers, length of the sales cycle, close rate, customer acquisition costs and their payback.
• Market and competition: reason for the present timing, changes in the market, competitors and the reasons why customers choose the company.
• Team: division of tasks within the management, open key positions, shareholding of founders and employees.
• Setbacks: wrong decisions of the last 12 months and the consequences drawn from them.

The last point carries particular weight. A specific wrong decision together with its correction shows judgement; the answer that nothing went wrong is read as a lack of self-criticism.

Follow-up

Every meeting is documented on the same day: participants, questions asked, documents promised, assessment of interest and agreed next step. The entries are collected in customer relationship management (CRM) software or a process list so that all meetings of a round remain comparable. Documents promised go out within the stated deadline, often within two working days. From the reliability of such commitments, investors draw conclusions about how punctual and careful management reporting will later be, the regular reports to shareholders and the advisory board.

Questions that recur in several meetings feed into the deck, the data room and preparation. Rejections are also evaluated: the reasons are asked for without argument and show whether an objection lies with the company or with the investor's profile. Contact with investors who decline in this round is often maintained through a regular investor update.

Practical example: investor meetings in a Series B

A software company with EUR 5 million in annual recurring revenue (ARR) is seeking EUR 15 million in a Series B, a growth round after the Series A. With one of the investors approached, the path to an offer runs as follows:

1. Week 1: First meeting of 45 minutes with a member of the investment team; the pitch deck was provided three days beforehand. A follow-up appointment on the figures is agreed.
2. Week 2: The investor receives the cohort analysis and the financial model as a working file.
3. Week 3: In-depth meeting of two hours with management and the head of finance. Asked about development at half the new business, the model shows the cautious case. Existing funds of EUR 3 million plus EUR 15 million from the round, divided by an average cash outflow of EUR 0.8 million per month, give 22.5 months of runway.
4. Week 4: Two reference calls with customers and access to a first part of the data room.
5. Week 6: Partner round of 60 minutes, followed by internal deliberation without the company.
6. Week 7: Term sheet with an acceptance period of ten days.

In parallel, the company goes through the same stages with further investors. Because the meetings take place in a common time window, two term sheets are on the table at the end, and their terms can be compared and negotiated. The answer from week 3 carries a lot of weight here: if the funds last almost two years even in the cautious case, enough lead time remains for the next financing.

Distinction: investor meeting, management presentation and roadshow

• Management presentation: the in-depth presentation to investors or buyers in the review phase, with several managers. In funding rounds it is one stage within the investor meetings.
• Roadshow: in the funding round, the planned sequence of many investor meetings within a short period, of which the individual meeting is a building block. In an IPO, by contrast, the term means the management board's presentations to institutional investors during the offer period.
• Due diligence: the systematic review on the basis of documents. Investor meetings precede it and accompany it.
• Investor update: the regular written information for existing or prospective investors. It maintains contact between rounds but does not replace a meeting.

Common mistakes

• Too much product, too few figures. A long product demonstration displaces the topics on which investors decide: growth, customer retention, profitability and planning.
• Defence instead of argument. Critical questions show interest. If they are treated as an attack, it remains unclear how cooperation would go in difficult phases.
• Figures not at hand. If the management has to look up key figures such as the churn rate or runway, doubts arise about how the company is steered.
• No goal for the meeting. Without a defined next step, a meeting ends amicably but without a result.
• Meetings without an alternative. A company that speaks to only one investor has no basis of comparison on the terms and little room to negotiate.
• Missed follow-up delivery. Documents promised that arrive late or incomplete weaken the impression the meeting has left.

Frequently asked questions

How many investor meetings does a funding round need?

Significantly more than the number of offers that are ultimately wanted. Many first meetings generally produce few term sheets. An approach that covers only a handful of investors therefore often ends with no offer or only one, and thus without a choice.

When is valuation discussed?

Usually only in the in-depth meetings, and put in binding figures in the term sheet. In the first meeting, round size and use of proceeds are stated. A valuation expectation fixed early limits room for negotiation before competition among investors has arisen.

How does a company prepare for an investor meeting?

With a view to the investor, its own figures and the goal of the meeting. In advance, the company clarifies the investor's investment focus, investment amount and decision path; the management knows runway, churn rate and planning assumptions without looking them up. The person from the management responsible for the financing usually attends the first meeting; the heads of finance, sales and technology also attend in-depth meetings.

How long does it take from the first meeting to the term sheet?

Often several weeks to a few months. The duration depends on the investor's decision path and on how quickly the company can deliver requested documents.

How much runway should a company have at the start of the meetings?

As a guideline, 12 to 18 months. Meetings, review, negotiation and notarisation together take several months. If the runway becomes tight during the meetings, the company loses negotiating leverage, because investors recognise the time pressure.

The Roemer Capital view

Before every in-depth meeting, we go through with the management the questions to be expected at that point, the uncomfortable ones first: customer concentration, deviations from plan, runway in the cautious case. The aim is not a memorised answer but that none of these questions is thought through for the first time in the meeting.

After every meeting, we record which points are open and who answers them by when. We pay particular attention to what the investor's contact person takes into the internal deliberation: a summary in a few sentences and the figures that the person has to defend there. We supply this document together with the company before the partner round takes place.