Venture capital firms are constantly inundated with emails requesting funding. This method is quick and simple, but it is rarely effective. Therefore, Spending time researching and building your own unique approach to gaining funding is the best way to actually secure the money your business needs. Going after funds without any real effort makes you look just like everyone else, no matter how amazing the business and idea really are.
Approaching a venture capital firm is a bit uncomfortable for most entrepreneurs to learn; however, it’s well worth the time and effort and is necessary to bring your business to the next level.
Keep in mind that VCs are in business because of companies like yours, so the relationship is not one-sided like it might feel. You are just as important to them as they are to you!
Here’s a breakdown of some of the best ways to approach Venture Capitalists:
Do Your Research First
This dates back to elementary school. If you want to do something well, you should first learn everything there is to know about it. By reading this article, you're on the right track, but there's so much more you'll want to know before approaching your first VCs.
Here are a few links that will aid your research: Crunchbase.com & Pitchbook.com. Now that you have your approach techniques and ideas, you’ll want to learn as much about each VC’s portfolio as you possibly can before taking any more steps.Check their website to see if your company fits their portfolio at all. It's not worth chasing down investors who aren't interested in what you're offering.
View the partners' or company's LinkedIn pages, Twitter accounts, Facebook pages, and so on, and read up on any news releases by searching their names in Google. Take in this information and write down any similarities that will give you an advantage. You don't want to freak them out by telling them everything; this is just to get a better understanding of the people you're pitching to.
You'll get a good sense of who the VCs are connected with and who they trust by browsing LinkedIn and Facebook. This is where a friendly introduction can be made.
There is a better chance of developing a relationship when a trusted friend refers a founding team. One of the most important aspects of business is trust. Trust is everything when it comes to money. Because you are the company's spokesperson, the VC must have faith in you. Secure a warm introduction and you'll be miles ahead of the competition.
You could accomplish this by meeting with someone in their network to discuss your business, or you may already have a great connection who is willing to recommend you.
First Mistake is Emailing
Do you get pitches in your inbox on a daily basis from businesses attempting to sell you services and solutions to help your business grow? You probably get these emails all the time. And you already know they're ineffective.
If someone truly wants to work with you and your company, they'll probably do more than send a quick email. If you don't have any other options, try this approach, but don't expect a high response rate. Make your presence known. Get that introduction from a mutual friend or from other investors in your company. Send an investor update once a month with no ask or send a product sample.
These are all different ideas that make you memorable. Whatever you decide to do, make your pitch creative, make it speak to the VC, and make it an accurate reflection of your business and principles.
Instead, Meet Them in Person
Find someone you know that knows them; LinkedIn is a great tool for this. Ask around. See what college/university they went to. Find out other companies that they have invested in where you may know an exec. In short - detective work
Once you find that person, see if you can get them to make an introduction…a real one. Best is ‘let’s meet for coffee or a beer’ - that’s worth a ton. Fallback is an email introduction from the mutual contact. Most VCs with a high-level of professionalism will respond to a respected contact and at least give you a few moments…and that’s all you should need if it’s a really great idea.
Fallback to that is to find out where the VC might be at a point in time…and be there also. Now, I’m not condoning stalking…but an investment conference, for example, where they attend to hear pitches by young companies is one avenue. I myself have ‘cornered’ a VC at an investment conference, hit them with a good 60-second teaser and asked for a 20 minute timeslot to go deeper…and gotten an investment.
Make Each Investor's Pitch Unique, Rather Than a Generic Pitch.
Speak with the investor directly. All of the research comes into play here. Assume you come across several articles and videos in which the investor expresses a desire to be heavily involved with each company in which they invest.
Assuming this is a good fit for you, make sure to address it throughout the pitch. Inform the investor that you are the best candidate for the way they prefer to work.
When you meet with VCs, they will drop hints about the things that are most important to you. Pay attention to these and make sure to address every concern they raise in a strong and honest manner.