Whether you’re a pre-seed founder who’d like to join us for Office Hours at Forward or you’re simply interested in making the most of what VCs put on offer, I’ve collated key learnings, trends and tips in this post so you can ace your next Office Hours.
What are Office Hours?
In the VC ecosystem, Office Hours typically refers to two different meeting settings between founders and investors:
For VCs: VC investors meet with founders who are looking to pitch their startup ideas or seek advice
For accelerators and incubators: At the end of an accelerator or incubator program, external VC investors are invited to meet 1-on-1 with founders from the cohort who pitch for investment
Forward’s Office Hours is the first type, and we’ve been running ours for over 6 years. Nearly 4000 founders have applied since 2018 alone - and we’ve gathered a ton of learnings.
Our Office Hours are open to any pre-seed founder. We receive an average of 120 applications per month and carefully review and respond to each and every one. Not only does this remove the barrier that early-stage founders often face in needing a ‘warm intro’ to get a meeting with a VC, but it also greatly increases the chances for founders from different backgrounds -- be that by gender, ethnicity, academic or professional backgrounds -- to get to meet us.
On average, we have a 10% success rate for those who apply. There’s then a 1% chance those successful applicants will get funding from Forward.
Read on for some valuable lessons based on what we’ve learned over the years.
(And apply here if you think you’ve got what it takes!)
The most common reasons a founder’s Office Hours application is unsuccessful are (1) concerns about the product vision or startup idea, (2) the addressable/obtainable market size is too small and (3) competition is too high.
After the top 3 reasons, the next 4 most common reasons are due to the startup not being a fit with our fund’s investment focus. Do your homework on the fund you’re looking to speak to!
There are other ways to improve your application beyond what your startup is about. Keep your application short and punchy. Tell us why we should be excited early on. Communication is key!
Forward has a preference for applied AI businesses, followed by marketplace businesses, then e-commerce businesses.
In 2020, we kicked off the year by increasing the frequency of Office Hours from every 6-8 weeks to monthly, increasing the number of founders that we take in for meetings. We also moved the sessions online, allowing for us to cater to founders who are based all over the UK, not just in London.
Top 3 reasons founders get rejected from Office Hours (77% of applications)
VCs accept and reject Office Hours applications for many reasons.
While it rarely ever boils down to one reason alone, I’ve segmented the main reasons why we pass on applications at Forward in the chart below:
Year after year, the top 3 reasons for passing have been:
Concerns about the product vision or startup idea (28%);
Market size too small (26%); and
Competition too high (23%).
Together, these top 3 reasons account for over 77% of the applications we reject.
Reason 1: Concerns about product vision or startup idea
The most common pass reason is because we have concerns about the product vision or the startup idea.
It can relate to a number of things, so it’s not because you couldn’t get your company's entire vision across in a short application form.
We may pass for this reason if we’re not convinced that
- your idea exhibits a clear use case,
- your idea meets the perceived needs and wants of customers (because it hasn’t been adequately tested for demand),
- your end vision is clear.
Reason 2: Market size
The second most common pass reason is over market size.
There can be multiple underlying factors at play here too. Most often, you’ll get a pass here if the addressable market you’re targeting is not large enough for venture scale, i.e. >£1bn in the UK alone.
If your total addressable market size is larger than £1bn in the UK, we might still have concerns if:
a) the large market is crowded with many other players, which squeezes the obtainable share of the pie (also see competition below), or
b) your revenue model or unit economics aren’t likely to yield venture-scale returns, regardless of how big the market is.
Reason 3: Competition
The third most common pass reason is over competition.
This could mean your offering isn’t differentiated enough or the competitive landscape is too crowded.
If there are lots of well-funded, well-established or even startup-level competitors with similar or identical propositions, you’ll need to exhibit a strongly differentiated offering and go-to-market strategy to compete with those who have more money or a head start.
When outlining your unique advantages over others in the market, you should also take into account the possibility that incumbents in adjacent markets could move into your vertical with a competitive product.
Learn how to differentiate yourself from your competition here.
Giving founders greater clarity on the reasons why we passed
Here, I’ll break down the remaining reasons why we pass at Forward, from most common to least common:
Off-strategy for our fund: we passed because your business sits outside our fund’s sector focus areas. We invest in applied AI, marketplace and e-commerce businesses.
HQ outside of the UK: we passed because we only invest in UK-registered businesses where the management team are also based in the UK.
Conflict of interest: we passed because we have a similar or competitive investment within our portfolio of companies.
Stage of the business: we passed because we felt that the business is too early-stage and hasn’t been adequately tested for demand, or that the business is too late-stage (we invest in pre-Series A startups).
Go-to-market strategy: we passed because there are high barriers to entry or potential frictions to getting your product in your customer’s hands.
*Traction: we passed because we would like to see early signs of traction or customer demand, or the existing traction doesn’t demonstrate high demand.
Technology risk: we passed because the technology isn’t developed yet, is difficult to develop or is not proven to work yet.
*Business momentum: we passed because the business looks to have plateaued or has not demonstrated an increased month-on-month growth, product development or user engagement.
(Those with a * are more common at seed stage)
Insights on Forward’s preferred focus sectors
The fourth most common reason for Office Hours rejections is the business idea is off-strategy for our fund’s focus (7%).
While our 3 sector focuses are Applied AI, Marketplaces and E-Commerce, did you know that we also have preferences within these sectors?
Figure 1 below segments the applications that we receive by sector, while Figure 2 outlines those same sectors but for successful applications:
As you can see, the acceptance rate for Applied AI companies is very high. While only 13% of received applications are within Applied AI, more than a 3rd of the founders we choose to meet are within this sector.
The acceptance rate of Marketplace businesses against the number of applications received is fairly stable. E-commerce businesses, on the other hand, are slightly on the decline.
How Forward made changes to Office Hours to improve your odds
While 2020 was the year for many unprecedented changes, it is also the year we decided to revamp and improve our Office Hours programme!
Here are a few tweaks we’ve made to the programme and the reasons why they improve the experience for founders:
We increased the frequency of Office Hours from every 6-8 weeks to every month. This increases the number of founders that we accept and meet to an average of 240 per year.
We moved Office Hours meetings from in-person meetings to virtual meetings. This allows for founders who are based all over the UK to apply and meet with us, not just those who are based in and around London.
We increased Office Hours meetings from 15 minutes to 20 minutes. While this doesn’t increase your odds of acceptance, it does give successful founders more time to pitch their ideas or receive feedback from us.
Beat the odds: how to improve your next application
Now that you’re an expert on the most common reasons VCs pass on Office Hours applications, you’ll be sure to address those top reasons in your application. You’ll tell us about why it’s exciting, characteristics of the market, your defensible moat, and why you and your team are poised to win.
In addition to selling us on your product or startup idea, here are some additional tips on how to improve your applications:
Be succinct: keep the application punchy and concise.
Hook us early: Engage and excite the readers early on.
Include compelling statistics and trends: Give us some real world numbers and examples that prove that your market is massively underserved or growing exponentially.
It’s (more than) okay to humblebrag: Passing because there are gaps in your team isn’t as common as other pass reasons, but you still should demonstrate why you and your founding team are the right people to execute and succeed. This is amongst the top reasons for a successful Office Hours application.
Learn more about how to get a spot in our Office Hours sessions here.
You’ve been accepted! Now what?