If you’re in the market for Venture Capital then how do you choose the VC who will be the right one for you?
After all, VC’s are just like potential customers. There are many investment styles in the VC community and no one size fits all. So you need to do your market research to discover who is your primary target before you make your approach.
You need to understand that shot gun marketing will just not cut it in this business.
Obviously location is important but you also need to identify the VC’s who service your industry sector. Plus you should be looking out for those VC’s who have a record of providing capital to businesses at your stage of development. Some VC’s specialise in Early Startups. Some in Mergers and Acquisitions. Others in Management Buyouts. Others in Expansion Capital.
Money isn’t the only consideration. Try and find a VC with the industry and/or political connections to help make the introductions you need to improve your business network.
Remember: A VC who has past, present or future investment in a potential downstream buyer of your business or product can be an invaluable asset.
A great way to start this research process is to investigate the investment portfolios of the VC’s you are interested in pursuing. Try and find VC’s who have previously invested in companies similar to yours.
Linksviewer is a powerful visualisation tool that will help you to do just that.
The Linksviewer allows you to map the relationships between investors, industry sectors and funding across Silicon Valley.
When you have identified who is the best fit see if you can find somebody to make the initial approach on your behalf. A quality introduction (or if not that a referral) is a prerequisite for a personal invitation into the VC’s ”Ring of Confidence” .
Finally, when you walk into a VC’s office you need to know more about their business than they do. The initial conversation is always easier when you start talking about them rather than about you.
Futher Reading
Gigaom: VC, Angels or Bootstrap?
Other posts on Thinking Like a VC:
- Don’t think strategy: Think like a VC
- What’s the Exit Strategy?
- Should I Get my Wallet Out?
- Risk or Return? Think about what you are pitching
Posted on October 24, 2009
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