How to Find the Correct Venture Capitalist for a New Company
There are approximately 750 venture capital firms in the United States, according to the National Venture Capital Association. Each VC firm focuses on a unique blend of attributes for the companies it funds. The top three most important attributes are: 1) the location of the company seeking funding; 2) the sector in which the company competes; and 3) the current growth stage of the company.
New companies seeking venture capital must focus their efforts accordingly, to save time. To do this, use a combination of VC database software; networking with your friends, families and associates; and attending social gatherings and industry events.
Other People Are Reading
Instructions
-
-
1
Purchase a venture capital firm database, such as VCgate or Growthink Research. Enter parameters such as your location, business sector and your current growth stage to narrow the list. Most VC firms prefer to work with companies based within 200 miles of their headquarters, operating in a specific sector and at a specific growth stage. Save the resulting list of VC firms for use in the rest of the following Steps.
-
2
Visit the websites of every VC firm you identified in Step 1. Verify that these firms' location, sector and stage preferences are as they appeared in Step 1. No VC database is perfectly up-to-date, while VC websites are more accurate.
-
-
3
Vet the VC firms further by ascertaining whether they are actively making investments. If they have not invested within the past year or two, they are not in the market. Strike those from your list.
-
4
Target VC firms whose partners show past success in your industry. VC firms always put at least one of their partners on the Board of Directors of every company in which they invest. This allows them to coach companies towards a lucrative exit for all. The more similar the experience of the VC's partners to your business type, the more likely they will fund you, and the better they can coach you.
-
1
Tips & Warnings
Work your connections. Reach out to friends, family, business associates and mentors, and ask them for introductions to VCs they may know. Warm introductions are one of the best ways to access venture capital firm. If you do not believe you know anyone who knows a venture capitalist, you are probably wrong. Ask, and you may receive. Later you can determine whether such friends of friends are the correct venture capitalists for your new company. Even if they are not a good fit, they might still be able to introduce you to the right VC, as the venture capitalism industry is very tight-knit.
Attend social gatherings and industry events at which you might encounter venture capitalists.
Do not formally contact any VC firms until you have all of your marketing materials ready. You will need to have written a business plan, memorized your elevator speech, locked in your tag line and created a slide presentation. Do not show up empty-handed to a meeting with a VC, as it may be your only chance to make a strong argument that your business is worth funding.
References
Resources
- Photo Credit Dollar bills image by MAXFX from Fotolia.com
