How Do I Get A Venture Capitalist
I just received an email from a reader and it was one of the shortest emails ever…”How do I get a Venture Capitalist?”
This subject could be covered briefly in a book or two rather than a post so I thought I would cover some of the essentials. If you’d like more – let me know.
What are you trying to achieve when you meet with VCs?
You may think it’s to close in on, let’s say, a $3 million dollar investment or whatever you are looking to raise (and you should certainly keep the goal in mind) but there are stages when building a relationship with a Venture Capitalist – just like any relationship.
You need to recognized those stages and make sure you are delivering at each step of what we can call “The Stages of Captivation”.
Why call it that?
Because that is exactly what you are trying to do – you are trying to captivate a VC at each stage of your interaction – from the first communication all the way through to term sheets and a deal.
Why?
Because you want to establish and build a relationship with a VC
You want to attract them and encourage them so they want to build something great with you. You may not be able to see beyond it right now but believe me, it’s not about the cash, it’s not a short term relationship and it’s not a loan – it’s exactly what I described, you are looking to start and develop a relationship which allows both you and the VC to create something worthy of their and your efforts.
So what is the First Stage of Captivation?
Before you even get through the door – you need to hook them.
How do you do that?
By making yourself look attractive.
Most often that first touch with a VC will be from your initial introductory email or executive summary.
Now be careful, with these two tools you are NOT trying to get your entire life story into as small a space as possible, you want to Hook them.
In other words, you are trying to entice them i.e to wet their appetites just enough that they want to meet you. So don’t try to answer every possible question you think they may have – give them enough information so they know they are interested in giving you an hour or two out of their busy week.
How?
Focus on the business opportunity and in particular, the size of the opportunity i.e. the upside if you manage to create a company which delivers on your expectations but a note of caution…
Try not to use to much hyperbole – keep the fact that you are about to change the world to yourself for the moment, instead cover the industry you are focused on, the business you want to build, why you are the right team to build it and if you cover those elements I would consider stopping there.
There’s also some debate about whether or not you should mention that you are reaching out to a few VCs. Some people say that they’ll just pick up the phone to their colleagues and find out what they thought….and others say you should mention you are talking with others.
My view – mention it…probably as part of the initial discussion.
Why?
Because if you believe there is a demand and the potential for scarcity with a possible investment then you would try to evaluate the opportunity quickly to ensure you don’t lose the chance. It’s just human nature…
And you – as the fund raiser, want to create some momentum…
If you are attractive and popular with others then you’ll be more attractive and popular with these VCs.
And aside from the psychology of it – VCs want to find out about attractive opportunities before their VC competition, so consider briefly mentioning that you are meeting with a select group of VCs in Sand Hill Road for example, this creates an ‘Impetus for Investment Action’.
…and because you do, the VC’s will be more compelled to consider your opportunity and act faster.
So and let me make this point very clearly, one element of the hook is to suggest interest from their competition
Why?
To create momentum. You want them to want you.
And what will create that impulse?
A great initial hook, competition and a closing window of opportunity.
Throughout the process maintain momentum without looking desperate – i.e lean towards professional efficiency rather than hounding or being pushy…
Capitalize on human nature – be confident and show you are in demand.
A final note of caution – there are not many bullets in this gun – do not try to suggest competition over and over again – use those few bullets selectively and wisely.
So that covers the First Stage of Captivation or The Hook.
One last thought for today – keep in mind what the VC’s you are talking too bring to the party aside from cash?
Do you like these guys? Do you trust these Guys? Do you want to work with these guys for the next five years to build your businesses?
Here’s a question from me which would really help me write better articles. Are you going through this process now or soon? What one thing do you want or need to know? What one question do you have?
Let me know by adding a comment. I appreciate your feedback.
Here’s to your Start-Up Success!
Andrew
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