Nailing the “Why Now?” When Raising VC
To successfully raise venture capital, you need to convey a compelling narrative of the opportunity you’re pursuing and how your team is best positioned to succeed at building a monster business. A key element that many founders struggle with is the “why now,” i.e. the exciting macro conditions that enable breakaway success when it wasn’t possible before.
To help think through this process, determine where to spend your time and effort, and how to nail the “why now,” we sat down with Angela Tran. Angela is a General Partner at Version One Ventures - a pre-seed/seed fund whose goal is to support the best new ideas in climate, crypto, health care, AI, and robotics, among others.
Why does “Why now” matter?
When you sit down with an investor, your biggest priority is to communicate the stakes and potential for your company in a short amount of time. It’s critical to answer this question at the very beginning of your pitch, communicating the information that follows relevant context. A big idea is capable of regular growth any time; combining this potential with an understanding of current market conditions and capitalizing on the trends of the moment enables the possibility for the type of outsized returns that investors want to see.
Another benefit of tying the potential of your product or service to favorable macroeconomic trends is establishing confidence and building trust by demonstrating your market knowledge and competence as a founder. This is particularly important in the beginning stages of your start-up when you might not have years of statistics and proven growth to back up your idea.
Time is of the Essence
Your “why now” should be time-bound– not as it relates to your personal success as a business, but as it relates to the industry itself and the macroeconomic conditions that have led to this inflection point in the market.
A major component to fundraising is urgency: why this product or service is ripe for success at this particular moment, and why you’re the founder who can capitalize on that potential. The key here is to identify the customers who needed your product yesterday. In other words, as part of the narrative building that defines your organization’s mission, the “why now” can’t be divorced from the customer. One of the biggest challenges in the climate sector is connecting the relevant issues such as severe weather, rising temperatures and sea level, or resource scarcity to a buyer, and then clearly answering the question: “whose ass is on the line if they DON’T buy your product?”
Think of the acute problems your customer is facing right now, and the timely solutions your product or service will provide in order to instill a sense of desperation to address that problem or need. Alternatively, you could approach this challenge by thinking of your product’s “happiness factor” - what makes your idea cheaper, more convenient, or easier to navigate than the competition that currently exists? Why does your customer need this product or service, and why do they need it right now? Not in six months or a year, but something that will provide real benefits next week. These benefits should be concrete enough to force that customer or investor to reconsider their current methods and pursue new solutions to these changing problems as a result.
Learn to acknowledge your competition by framing it in the context of your “why now.” There will always be incumbents and adjacent competitors, regardless of the sector your business is focused on. Competition proves the need is there; otherwise, nobody would bother to try solving that particular set of problems in the first place. Use this idea in combination with your argument for urgency by highlighting that while there might be other businesses working in the same sector, this particular innovation or market shift will be the difference maker responsible for your outsized returns resulting in transformational change.
Communication is key
The goal is to develop the “why now” aspect of your business narrative so that the product or service feels like an obvious solution to the economic trends and consumer needs you’ve laid out in your pitch. Lead investors to that solution by setting up the context and problem in such a way as to guide their thought process in the right direction. The best pitches bring them just far enough to develop the story on their own, after you’ve placed all of the components in front of them in a clear, concise, and exciting way.
Angela is a partner at Version One, a generalist fund backing mission-driven founders at the earliest stages of development. Prior to Version One, Angela co-launched Insight Data Science, a YC-backed startup designed to help PhDs transition from academic research to careers in industry. Angela received her PhD in Operations Research & Financial Engineering from the University of Toronto where she is a sessional lecturer. She is a trustee on the board of the Computer History Museum where she chairs the NextGen advisory committee.