A client of ours recently mentioned that he identified a venture capital fund that he thought would be a perfect investor for his new mobile app. He said that the fund’s portfolio seemed to be loaded with similar apps and that they would probably think that he is a good fit for them. He wondered, though, what is the best way to get a meeting with the VC. We told him that, hands down, the best way was to be introduced by somebody the VC already knows and trusts.
As you know, most venture capital funds specialize by market or product, geographical area, and stage of development. So, for example, some only do early stage B2B technology deals in Silicon Valley, while others only invest in healthcare technology companies around Boston that have a minimum of $10 million in annual revenue. Once you have identified a VC who you believe invests in your kind of deal, you will want to closely examine the fund’s portfolio to find companies that have something in common with your enterprise. Most funds list their portfolio companies on their website. If they don’t, you usually find them using Google or tools like ChubbyBrain.
The next step is to check out the management team members on each portfolio company’s site and see if you happen to know any of those individuals. If you do, call them and see if they will introduce you to the investor at the venture fund that sits on their Board, or with whom they have the most contact. That’s it!
Chances are, you probably don’t know anyone who works at one of these portfolio companies. But that’s ok. You can still meet them. How? Virtually everyone in business (including you, we hope) is on LinkedIn. Locate these people on LinkedIn and see if you have any acquaintances in common who can introduce you. If not, you can use LinkedIn to send them a message. Let them know that you run a company similar to theirs and that you would like to have a brief conversation. Hopefully, you can get them excited about your startup and willing to make an enthusiastic introduction to their investor. It’s time-consuming, but it’s a great way to build your network and you’ll probably identify some new opportunities that have nothing to do with being introduced to a VC.
Before you begin networking and seeking introductions to fund managers, however, you must be certain that your company is “investor ready.” It’s not enough just to have a brilliant idea. You need, at a minimum, a strong team, a working prototype, and preferably some actual paying customers. You will also need to prepare some materials to help investors understand and evaluate your business. At a minimum, you will need a well-developed pitch deck, executive summary, and business plan that explain where you are going with this business and how you are going to get there. You will also need a 5-year financial forecast based on defensible assumptions. When preparing these materials, be sure to avoid these common mistakes.
For additional information and advice on raising capital, please see the Funding Your Business resources on our website. Good luck!