10 Pragmatic Steps to Raising Venture Capital

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10 Pragmatic Steps To RaisingVenture Capital

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07/12/2007

10 Pragmatic Steps To Raising Venture

Capital

As a former VC I am often asked by entrepreneurs I am

having trouble raising money, can you please give me some

advice on how to improve my chances? Beyond having a

start-up that is obviously the next Google, there is no easy way

to raise VC money, especially if you are a first time

entrepreneur with few, if any, VC contacts. The harsh reality

is that you face an uphill battle to get a meeting, let alone a

term sheet, but the good news is that by taking a pragmatic

approach to getting your foot in the door you can greatly

improve your chances.

All too often I run into entrepreneurs whose fundraising

strategy amounts to I sent a form letter to the 15 VCs I saw

mentioned in Tech Crunch yesterday, but none of them got

back to me. Rather than randomly spamming VCs, you are

much better off taking a very pragmatic and methodical

approach to fundraising. This method should force you to

identify those VCs that are most likely to not only be

interested in your start-up idea, but also to have the cash,

capacity and inclination necessary to pursue it.

To that end I offer this 10 step method for getting your foot in

the door of a high probability VC. Once you get in the door,

the rest is up to you:

1. Prepare a 10-15 page power point presentation and a 1-

2 page executive summary. Thats it. Dont bother

with a 100 page business plan, no VC is going to read

it. Make sure the documents cover: stage, location,

team, market, market size, business, business model,

capital structure, and capital required.

2. Get a list of VC funds. This list from the NVCA is good

place to start. The NVCA also puts out a member

directory that shows which funds are interested in

specific sectors, but for some reason they dont make

that accessible, but almost any VC will have a copy.

3. Go through the raw list and identify those VC firms thatmake investments in your sector, stage, and city. You

can do this by going to each firms website and

reviewing their high level firm description and noting

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their location. As a general rule, its pointless pitching

an early stage company to a Silicon Valley VC if you are

in Alabama.

4. Go through this initial subset of firms and identify

specific partners at each firm that focuses on making

investments in your specific sector and stage ofdevelopment. You can do this by going to the websites

at venture firms and reviewing the portfolios of the

individual partners. Dont send your software company

pitch to the partner with 10 semi-conductor deals, its a

waste of time.

5. After you identify a list of specific partners at specific

firms investing in your specific stage and sector, then

try to indentify how many boards each of those partners

are currently on. You can usually do this by just reading

their bio or just looking at the firms portfolio company

list. Sort the list by fewest board seats first.

6. Try to identify when each partners VC company raised

its last fund. You can usually figure this out by looking

at the firms press releases. The more recent a new

fund has been raised the better.

7. Priority rank the partner list with the goal of having the

partners with the strongest sector focus, the least

number of board seats at the firms with the newest

funds at the top. It also helps to rank this list by age,

because younger partners are less likely to have

significant recycled deal flow and therefore moreopen to newcomers.

8. Figure out if you know someone who knows that

partner. For example, go to LinkedIn and try to figure

out if you know someone within 1 or 2 degrees that

knows the partner. If you do and you are pretty sure

you can get a warm intro, call in that favor ASAP.

9. If you strike out on a warm intro, do a Google Search

and try to figure out if the partner A) has a blog or B)

has recently said something mildly intelligent in some

other public forum. Then send that partner apersonalized e-mail indicating deep respect and

appreciation for whatever they said that was mildly

intelligent. Mention that you noticed they invested in

Companies X&Y (boards they are currently on) and you

thought they might be interested in taking a look at

your company because its in the same sector they are

focused on and has a very promising approach to the

market. Attach your 2 page summary to the e-mail.

10. If they respond, follow up ASAP on whatever they ask

you to do (usually to talk with their Associate or

someone else at their firm). Congrats, you are in! Dont

screw it up. If they dont respond, dont bother re-


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sending your e-mail 4 times, its a no and you should

move on. There are plenty of VCs in the sea.

These 10 steps do not guarantee getting a meeting, but if

properly executed they will significantly improve your

chances. If you cant get a meeting after going through all ofthis, then chances are you need to do some serious work on

your idea/company.

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July 12, 2007 in Venture Capital | Permalink

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Comments

Good post....I have been involved with the VC community for

over 14 years form the pitching side....it is a good summary

and very true....getting the first meeting is the critical

step....I have used your material in my blog (cheeky I know)

and would like to replicate the summary for some of my

students if that is ok ?..and would like to connect on

linkedIn...would be good to touch bases from time to

time...hope you have a good weekend

Regards

Gordon

Posted by: Gordon Whyte | Jul 12, 2007 11:55:44 PM

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Brad Feld's legal disclaimer is a classic but since I am not as

funny as he is I will just state that the opinions on this blog are

mine and mine alone and not affiliated in any way with

Inductive Capital LP, San Andreas Capital LLC, or any other

company I am involved with. Nothing written in this blog

should be considered investment, tax, legal, or financial

advice. These writing are just my personal opinions, no matterhow misguided and ill-informed they may seem.

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