Time is the best due diligence
This was originally posted on my blog in December 2013.
I just announced that we raised a new round of funding for Sketchfab. Fundraising means due diligence, and both rounds I raised led me to the (somehow) easy conclusion that time is the best due diligence.
We recently went through the TechStars NYC spring 2013 batch, where we had the opportunity to meet one-to-one and on a regular basis with some of the best investors in the country. Yet we ended up raising with Balderton, a London based firm (and top European VC). The fact that we are from Europe helped of course (and that will be the topic of another blog post), but there is more to that.
We first met with Balderton almost 2 years ago, in February 2012, at a time when Sketchfab was still called ShowWebGL (true story) and wasn’t even incorporated yet. It was in Estonia, for Seedcamp Tallinn. At the end of a very long day, we started talking with Harry at the bar, which led to a meeting with Bernard in Paris a few months later. At the time we were clearly not ready for a VC round, but we kept Balderton in the loop, and after several discussions with Harry, Bernard and James, we ended up finalizing a great partnership to build the future of Sketchfab together.
Reason for that is pretty simple: business plans are useless to assess a business opportunity, and ideas are free. What really matters down the line is team and execution. And time is the only way to judge that. What also matters is the relationship you build with investors, and here again time is your best friend. Another good use case: Fred Wilson told me that from their first meeting, it took him 2 years to invest in SoundCloud.
What’s tricky is that for a startup, time is burn rate. And for VCs, time is the risk of missing a deal. Only the best VCs can take the time they want to make an investment. As for startups, I have two pieces of advice (nothing new here): a) always be fundraising, as someone you meet today might end up investing in 2 years from now. b) always follow-up with people you meet.
ps: edit on January 12th 2014, thanks Semil for the quote!