I was doing to research on how to approach a venture capitalist, and I came across a great blog AsktheVC.com (ironic huh). Anyway after reading some of the post and the comments, there was one that stood out most to me. I want to share it with our readers as well.
If you have a startup looking for funding, this is for you! Enjoy.
I just don’t understand the “I cannot find a way to get introduced to a VC comment.”
Raising money is hard, whether it’s through an IPO, VC, angels, or whatever. You read stories of some entrepreneur who meets with a VC, has the meeting the next day, and walks aways with a $8 million commitment. You don’t realize that this happens because the entrepreneur has a fantastic track record, he already knows the VC, maybe the VC already made a 10x return with him on the previous deal, and the idea is one that is the VC’s list of trends the VC likes to invest in.
Make a list of all the VCs you might be interested in. It would be an unusual VC who did not have a web site with a list of portfolio companies.
Then show the list to everyone you know. You will need a law firm. Go talk with 10 law firms that specialize in helping startups. If the partner you are meeting with does not at least know some of them, you probably have the wrong law firm.
Meet a bunch of entrepreneurs. Ask them who they have dealt with and who they like and do not like.
Same is true of commercial bankers, accountants, business school entrepreneurship professors, etc. If you have a business degree, your alumni association is probably a good way to network.
After all this is done, you should have a couple of contacts for each VC. If you don’t, either the VC has not been around the block or your contact base is not very good.
Every startup which is seeking venture capital needs to have someone on the team who knows how to do this, how to write a business plan, how to hone your pitch, how to manage the followup process. It’s basic contact management. If you cannot do this, can you really run a business? Identifying and closing customers is just as hard as raising venture capital and I think it is a similar process. It’s important to realize that this will probably be a time consuming process. One person has to be in charge of this process and be responsible for making it happen.
One additional point — Read Brad Feld’s Term Sheet series, and you will have an idea of why VCs ask for what they are asking and what is negotiable and what is not.
Comment via James Mitchell