In a previous post I gave you my take on raising funds in 2008 from the VC community, this was drawn from VCs I know and other entrepreneurs: Permanent Link to Important things to know about VC funding in 2008
In it I am told that you shouldn’t bother to try and get any attention from a VC unless you get a "high quality" introduction!
That’s from a few VC’s I know and the reason they say this is simple – it’s a test! It achieves two things for the VC, first it’s an excellent filter i.e. they don’t have to read unsolicited plans, and that saves a lot of time!
Second, it shows you have the very basic ability to SELL. If you can’t find someone who knows the VC and connect and then sell them on your idea then you have no chance in the real world of "knock the ball out the park" company performance.
So if you accept this premise that you have to get "connected" first and then you stand a chance of pitching a VC you can start an aggressive action plan!
Strategies for making VC connections:
- Get out the Rolodex and email all your friends/family/lawyer/CPA/colleagues and business people you know and ask them if they know the "type" of VC you need for your idea. Give them enough info so they know which type you need i.e. you have a software startup looking for a series A round etc.
- Once you have some people that know VCs you then need to convince those people that you have a great idea. Do this by producing a 1/2 page Exec Summary and a Powerpoint slide deck they can review and forward on.
- Also, create a compelling and sales lead intro email for them to use to go with your materials – this whole process is a sales process and needs to be dealt with as such!
- Next, before they send these off make sure that your friends have a "quality" connection to the partner in the firm you are approaching. It’s a waste of time getting your plan in via a tenuous connection as it will end up in the trash!
- Strong connections to the partners are via people that have already made some money for a/the VC and know the partner; are already a portfolio company; have a strong industry reputation and the VC will know of them and/or respect them. Or they are a VC themselves and will refer. Also your legal council or CPA may work.
- Visit as many places that VCs hang out as possible. This can be at Universities; business plan panels/competitions; industry events; investment clubs and gatherings (Churchill club www.churchillclub.org for example); angel investment groups and meetings (Most Active Angel Investors in the Greater Bay Area); get an invite to a portfolio company party/launch event; networking events; industry trade shows; startup launch events; …you get the idea. I have made a personal connection on a number of occasions simply by watching a speaker and then going up to them and trading cards afterwards.
- Use specific events for start-ups via the number of companies that organize these such as Silicon Valley Association of Software Entrepreneurs and it’s VC Breakfast Club and THE CXO LEADERSHIP FORUM for example, search for these organizations in your area. Many Lawyers and banks also organize specific pitch events and you need to try and attend these.
- STARTUP-U: SVASE’s Premier Event for startup entrepreneurs
Startup-U provides opportunities for you explore key issues of entrepreneurial success. This lunchtime program, comprising 5 regional events across the Bay Area, generally features a guest speaker from the venture funding community and encourages discussion participation by all attendees (typically 10 to 40 people). Startup-U meetings are currently held in:
- San Francisco
- Silicon Valley
- San Jose
- Walnut Creek
- It costs money! Yes these guys have to charge you for their time and also take a cut of your business (often). This is expensive and only for companies with significant resources.
- Many VCs don’t like have a man in the middle and only want a direct approach.
So now you know a few basic ways to connect and some of the etiquette its all down to getting in touch with as many as you can and as fast as possible with the very best quality plan (http://ecngx279.inmotionhosting.com/~tobean5/category/fundraising/vc-funding/).
BUT there is another way…
In case you think I always believe what I am told, I have another story that gives you an alternative to this approach on an excellent post on gigaom (http://gigaom.com/2008/10/12/12-steps-to-short-circuit-the-fundraising-marathon/) where Scott Painter (Painter has raised hundreds of millions of dollars in his career ($350 million for CarsDirect, alone) shows that his strategy can also work.
In short, he has created a pitch online and then does his research (http://www.crunchbase.com/financial-organizations and http://www.thefunded.com) as to which VC he thinks would value his idea and from there he creates a shortlist of VC partners and EMAILS them!
Now it helps that he is who he is but the point is that he creates a compelling sales message in the form of an email and gives the person an online pitch. This process self-selects a bunch of VCs down to a small group to call with a "warm" intro as they have shown some interest if they respond to the email and look at his online pitch/demo!
This is harder and longer than the traditional approach but hey I wanted to kill my own hypothesis that you have to get someone else to intro you the VC before you stand a chance…!
Also, you need every option you can get to m
ake an impression and a much larger number of VCs than you did before so maybe you should try both methods to maximize your chance of success…it’s all a numbers game.
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