The AirTree Investment Process
By: Jackie Vullinghs
Tags: Startup, Fundraising, Resources, Venture Capital

At AirTree, we’re trying to demystify venture capital and help entrepreneurs through the most opaque parts of the process, regardless of whether you are taking financing from us or others. We call this Open Source VC, and we openly share various resources including template term sheets, financing documents, ESOP and cohort templates on our website (this is growing to include offer docs and more soon). We want to take away some of the pain of starting and scaling a business, saving you time and money in the process. And when you come to your first financing round you’ll be able to understand what the investor is talking about, and know if they’re offering you sketchy terms.

In this post we open up on how we make decisions internally at AirTree. We hope this gives you a better understanding of the ways in which we work, and adds some more transparency to the fundraising process

When’s the best time to get in touch with AirTree?

If you think you want to raise venture capital at some stage for your startup, then get in touch as early as possible.

While your ‘product’ may just be a wireframe and some customer interviews, what we really want to understand is who you are, what problem you’re trying to solve, and what your special insight into that problem is.

5 of our 14 investments in 2018 were pre-revenue, so it’s never too early to speak to us.

And even if you’re not looking to raise right now, there are a ton of reasons why building a long term relationship with investors before taking their money is a great idea:

The average venture investment lasts longer than the average marriage, so it makes sense to go on a few dates before you commit. Two of our fastest growing portfolio companies, Secure Code Warrior and A Cloud Guru, dated us for over 12 months before we made it official. In that time you can test us out to see how much value we’re able to add and if you’d enjoy working with us. When the time comes for you to raise capital, the process can be super smooth and quick.

So how do I get in touch with AirTree?

The best way to get in touch with us is through a referral from someone we know and trust — maybe a founder in our portfolio or an angel investor we’ve co-invested with before. But if you can’t find an warm intro, we’d still love to hear from you — you can get in touch directly with everyone in our team at [firstname]@airtree.vc

You can also fill out the ‘looking for investment’ form on our website.

We’d love you to include a pitch deck when you reach out so we can take a first look and establish whether your startup fits our mandate and who in the team should meet with you.

The Initial Meeting

This is usually a 30–45 minute meeting for you to learn more about us and articulate your story and your vision. It could be on the phone or in person depending on where you’re based.

The meeting will be with a member of the investment team — Associate or Partner. Don’t stress about meeting a Partner straight away — our Associates have spent 8–10 years working in finance and operational roles in startups, and they have an equal voice at the table when we’re discussing new investments.

We try and make these meetings as casual as we can — so don’t expect some big board room with a big screen for your powerpoint. We’re really just trying to get to know you and add some value, we hope it’s a helpful conversation.

The Investment Committee

After the initial meeting we’ll get the rest of the investment team up to speed on your company and the opportunity.

So make sure the investor is equipped to tell your story well — provide them with the narrative and stats they need to communicate your vision and the opportunity to the rest of the team.

If the rest of the investment committee agrees we should look into your company further, we’ll start to do some research into the market you’re operating in and your competitors, so that we can ask follow-up questions in our next meeting.

The Second Meeting

Often we’ll include another member of the investment team in the second meeting to get different perspectives and make sure we’re asking all the right questions to fully understand your vision.

Sometimes at this stage we’ll ask for more information to deepen our understanding. Depending on your type of business (B2B vs B2C) and stage this could include engagement metrics, historical financials, user/revenue growth projections and your cap table. But don’t worry if you don’t have any of these yet, at an early stage what we’re looking to understand is your team, your vision and the size of the opportunity.

Once we’ve done some more research the investor(s) leading the deal will put together an investment paper arguing why we should make the investment and what the key risks are. Each one is different but it will usually have sections on Product, Market, Team, Differentiation, Unit Economics, Financials and Deal Terms.

We send this around the team and discuss it to raise any further questions and identify areas where we need to do more work.

If everyone is excited after the meeting it’s likely we’ll ask you for some customer references at this stage so we can hear from the people using your product every day.

The Partner Presentation

This is the final part of our process — we ask founders to come into the office (or videoconference if overseas) and present their vision to all the partners. You’ll have an hour to tell your story, field questions from the partners, and ask some questions of your own.

At the end of the presentation we have a debrief where we decide whether or not to issue a Term Sheet in the next 1–2 days. If we do, our terms are usually pretty simple (see our seed stage term sheet template here), and the lawyers will take over directing their due diligence. This should only take a couple of weeks if everything is in order.

And now it’s time to celebrate!

How long will all this take?

It really depends. If we already know your business well by the time you decide to raise, it can only take a couple of weeks, but most of the time we’d expect it to take around 4 weeks from first meeting to money in the bank if everything goes smoothly (customers are available for references etc).

Now what?

Once you’re in the portfolio, our goal is to be there when you need us, with offerings that actually help. We’re here to give you an unfair advantage.

Building a world class team: We can help you recruit key roles. Design an org structure that scales. Connect you with other companies for advice. Close out your most-wanted candidates. Shoulder the heavy hiring load.

Helping you level up: We know that sometimes using a fresh pair of eyes can be the best way to navigate the hardest aspects of scaling. That’s why we’ve built a network of experts who have been through it before, and can help you work through some of the biggest challenges you face. Sometimes this is 1:1 mentoring. Sometimes it’s facilitated group sessions with your peers in our portfolio.

Helping you find more people you can rely on: Being a founder can be incredibly lonely at times. That’s why we focus on connecting the brilliant entrepreneurs in our community to each other. We host intimate breakfasts and dinners, functional forums for C-suite execs, and a speaker series where we interview inspiring leaders in tech and other areas of society.

What do I do if AirTree said no?

Stay in touch. Things change —it may not be the perfect fit when we first meet, but that doesn’t mean we can’t work together down the track.

And a lot of the time we just get things wrong. We embrace our own ignorance, and there are several startups in our portfolio where we got it wrong initially and have paid a higher price in later rounds to get to work with them.

And here’s a list of other investors you can speak to in the meantime.

A full list of AirTree’s Open Source VC resources can be accessed here.