In today’s startup environment, the term “venture funded” appears to be synonymous with “my company won’t fail.” Based on the way tech blogs and startup websites report on venture-backed companies, you would think that every other startup is being funded by venture capitalists.
However, the reality is that less than 2% of all companies actually receive funding from VCs. This is mainly because most businesses don’t need venture money or they do not properly go about it the right way.
If you are a startup that doesn’t know whether or not you need VC investment, then you probably don’t. Bootstrapping or angel investors may be a better option. For companies that already understand their needs and are ready to look for venture capital, let’s proceed to find out exactly how to find and contact these mysterious people.
This article was originally posted at http://mytwoandahalfcents.com and has been republished with permission.
No one will read it. It is that simple. By utilising such conventional channels, there is nothing that separates your business plan from any other company. Therefore, it is not worth their time to read it.
The volume of business plans that VCs receive each month can be astounding. Your plan will simply become lost in the pile. More importantly, investors will not spend time reading blind business plans while there are countless other startups that are getting their attention through more creative means.
Consider utilising one or more of the strategies listed in the Do's to better your odds.
Cold calling or cold emailing doesn't allow you to distinguish yourself from any other company. If you don't have an appointment or they are not expecting your call or email, you then simply become an obstacle to them accomplishing their daily tasks.
Your email will be viewed as spam and this will not present the best first impression. Without some prior knowledge of who you are or your company, there is very little reason, incentive or purpose for an investor to listen to an entrepreneur who has randomly contacted them.
The great VCs and investors love to help people. They like to see an entrepreneur realise his or her dream and mould it into a profitable and value-creating business. Therefore, once you manage to get the attention of a venture capitalist or angel investor, don't immediately ask for money.
Build a relationship. Let them know who you are, what you stand for and what your goals are. After you create that genuine relationship, then you find an opportunity to pitch them on your investment needs.
Once you find VC firms that invest in companies like yours, find them on social media. A large number of venture capitalists are on social networks like Linked In, Twitter, Facebook or Q&A sites.
Furthermore, many of them have their own blogs in which you can read and comment on their blog posts. One of the more popular VCs who blogs and uses Twitter regularly is Fred Wilson of Union Square Ventures. Following him, knowing what he likes and doesn't like will better define whether or not your company is a good fit for his investment.
Another example is True Ventures' Q&A website in which the firm engages with users on various questions they may have. Using these tools to create a dialog will enhance your opportunities of creating a relationship, and in turn getting an opportunity to pitch your business idea.
Entrepreneurs need to be resourceful in order to succeed. When attempting to find an investor, consider talking to other companies that they have already invested in. The founder of a portfolio company knows how he earned the funding, and therefore can share his wisdom.
Start by going to the venture firm's website and browse the list of portfolio companies. Find a company within your space. Email the founder and ask to grab a cup of coffee. Talk to them about your idea, get feedback and begin building a relationship.
If your connection becomes strong enough, ask for an introduction. An investor will be more likely to give you 10 minutes of their time if one of their current investment companies makes an introduction.
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