Key takeaways
- VCs and accelerators encourage founders to use the PRFAQ Framework to think critically about their startup, articulate the story clearly, and inspire their team to act.
- VCs and accelerators use the PRFAQ as part of their selection/investment process to better evaluate founders and the opportunity they are seeking.
- The PRFAQ is the best tool to ensure alignment in the vision, mission, and strategy between the founding team and their investors.
VCs and accelerators get hundreds or thousands of messages, pitch decks, business plans, and pitch meetings per year. They want to evaluate teams on their founder-market fit and the merit of the idea. However, with such a high-volume, they resort to a “herd” mindset (who else is on the deal), warm intros, biased patterns, or, simply, the quality of the pitch deck. These are not intrinsically poor systems, but they lead to a higher rate of false positives and false negatives in their selection process. Pitch decks are too superficial and they don’t show if the founder has clarity of thought. Founders might have used an agency or consultant to help put the pitch and the story together, and rehearse the delivery of the pitch to the point they are “perfect.” Only after two or three rounds of conversations is that the (lack of) depth and critical thinking start to really appear.
PRFAQs are a great framework for venture capitalists (VCs) and startup accelerators to understand the vision, mission, and baseline strategy. It works for founders who are seeking funding and for the founders in their portfolio. It provides a consistent scheme of delivering information for faster and accurate evaluation of teams and ideas, levels the playing field across founders, and facilitates writing investment memos.
VCs and accelerators that identify a promising founding team or opportunity space spend several rounds of back-and-forth to get the clarity on the story. It’s common for founders to pitch ideas that are fairly incomplete in the most “obvious” ways. It might be a lack of clarity in the customer segment or core problem of the customer, the feasibility of the solution, or their go-to-market approach. Founders even have solid ideas or data on those topics, but it doesn’t come out clearly in their storytelling and they stumble when they are put on the spot.
For existing portfolio founders, VCs get “investors’ newsletter,” board decks, or other form of communication about what founders are doing in the next quarter or year. It’s not unusual for investors to learn about shifts in strategy, new product offerings, or even pivot too late to provide feedback. These updates are inconsistent across founders, across quarters, and they lack clarity in vision and strategy — often because founders and startup executives suffer from the Curse of Knowledge.
Asking founders seeking funding to submit a PRFAQ as a starting point for the conversation is a great way to kick-off the relationship. They already know what’s going to be covered in the PRFAQ, and if they don’t, it’s the perfect way for them to realize they are not ready to tell the story yet.
PRFAQs enable investors to sift through dozens of applications a week in a standardized format. Investors quickly understand the five Ws (why, what, where, who, when). The format lends itself for the important vision, mission, and strategy to be at the forefront, with the customer needs, pain points, or desires as the centerpiece. A PRFAQ allows a founder to show not only what they are building and why, but the thought process they use it. It brings out clarity and depth of thought and their ability to inspire action. Founders won't miss important parts of their story.
VCs can also ask their current portfolio founders to provide a PRFAQ once a year or when there is a proposed change in strategy, new product offerings, or a pivot to the business. For lead investors and board members, this is a great mechanism to engage in strategy discussions before annual planning or OKR setting.
A PRFAQ is a better document than a pitch deck, and it helps VCs and accelerators make better selection and investment decisions with fewer frustrating rounds of back-and-forth.
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Who’s this for?
Anyone making investment or selection decisions, including Managing Directors, Venture Partners, Investment Principals, Associates, Screening or Investment Committee Members, etc.
What makes a PRFAQ great for investors?
PRFAQs are great for investors because it provides more clarity, consistency, and coherence from founders submitting their startup story, and fewer rounds of information discovery. It encourages founders to do their “homework” before showing up to pitch. They have a stronger story about what they are building and why.
Who are the collaborators for the PRFAQ?
Founders, their team members, advisors, mentors, and existing investors will collaborate to create the PRFAQ. See PRFAQ for Founders to learn more.
Who do they share the PRFAQ?
Founders share their PRFAQ with investors as part of their pitching process. They might bring a printed version with them for a pitching meeting, or submit via the VC or accelerator website or via email message.
When is it not appropriate to use a PRFAQ?
PRFAQs are not execution plans. The details of the “how,” adoption and financial models, roadmap, detailed feature sets and user stories, go-to-market plans, and all the other details aren't in a PRFAQ. PRFAQs are also not a good document for an investor update since they are forward looking, not quarterly/annual reviews.
