Digital Health with Edward Kliphuis of Amadeus Capital
- Pitch Coach, Startups, Venture Capital

Can You Cold Call a VC?

Continuing our discussion with Edward Kliphuis – Venture Capital Behind the Scenes with Amadeus Capital Partners

We’re told that cold calling a VC doesn’t work. Can you speak to that? You include inbound – where founders are just soliciting you – as part of your deal sourcing. How many deals have you done from an unintroduced cold call?

Let me take those two stages. Let me first answer the first bit of your question. I think contacting VCs is always a good idea, but it needs to be understood that venture capital is not an end goal. We’re just another tool in the shed of tools or solutions for startups to grow. So I always advise founders to be introspective of the tools they need to grow their business and acknowledge that venture capital is essentially rocket fuel. 

If Amadeus Capital Partners invests, we are quite demanding the growth that we need to see, which is a function of our work model. Because the investors who give us the money ask us to have these companies that we invest in outperform, and some will go bust. Consequently, some of them have to outperform drastically to offset those losses to ensure that our portfolio still returns.

If the venture, for example, doesn’t fit that profile. Let’s say you have a particular kind of wearable, you have steady cash flow, but you won’t grow three or four times year over year, then maybe debt financing is good enough. Get a bank loan; you don’t need to have some annoying venture capitalists on your board.

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But if you feel there is a need to get venture capital to scale or ramp up at a certain velocity, I think it is advisable to reach out. 

The way I work, I like to at least always be in dialogue with founders. I believe that we are just filling another role in the ecosystem of startup creation. Rather than doing the tinder thing where we say swipe left, swipe right, and if you don’t fit our profile, you never hear from us again. We like to engage in a dialogue and send people the right way, even if it’s not for us for investment. We believe in people coming back into the ecosystem, potentially having their network referred to us. By doing good, we receive good. 

That said, I don’t think we ever invested on the first go on the cold outreach. We have, for example, from cold outreach, working with the founders for over two to two and a half years, and then finally invested. So it’s a longer-term relationship.

When you’re looking at technologies, this may not apply if you’re getting a little bit later, but especially if you look at an early stage, is it the team, or is it the technology, or is it a combination?

I won’t speak for Amadeus because I think there are different strategies at different stages. From what I’m looking at, we really look at product-market fit, and that really comes back down to four different categories.

We do assess the team. I think the team is critical in this instance, particularly the scaling stage. In the early stages, you’ll often find the lone wolf founder who aggregates all the information in their domain and is used to controlling the faith of the venture A to Z. If you think about scaling in an organization, unfortunately, that can no longer be the case. We oftentimes see a growth slump at that stage where you have to instill organizational discipline with different sub-domains like a CEO, CFO, or Product Officer. So it is actually imperative for us to assess how that particular step has been made or how it will be made.

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Second, for me, is product readiness. Is there any technical risk in this product still or not? If so, how much can we quantify it? What are the solutions to mitigate that risk, or have there already been market validation steps taken? Is there some proof of concept revenues that we can deduce that the product is ready to scale?

Then, is the organization ready with market-ready KPIs? Is there a reporting system in place? Do we understand how in particular SQL, MQL feedbacks actually feed into that particular revenue funnel? What is their attrition? How do they drive users to the top of the funnel? And lastly, is the go-to-market strategy sound?

Do we believe that the company is attempting to diversify its client base? Is there a potential for that because oftentimes, having a very concentrated climbing base can be very detrimental for the future of business?

We’re a somewhat later-stage player. So we look at these things with equal waiting and jump back to the first part to focus on the team or the entrepreneur.

Part III – Do Venture Capitalists only Invest in Serial Entrepreneurs?

Can You Cold call a VC?