Ask any entrepreneur worth their salt as to what is the one thing in their journey that they find really tedious, tiresome and disappointing, and the answer is almost always likely to be unanimous – raising funding from VCs (venture capitalists)!
However, that is where most entrepreneurs miss the trick in that they don’t think from the point of view of those sitting on the other side of the fence. It takes a lot of gumption and creativity to get inside the psyche of VCs and know what makes them tick and what are they looking for in a startup.
VCs typically seek pertinent and decision-oriented information such as the latest market trends, the nature and scope of good business deals and the apprehension of losing out on the next big thing. On their part, entrepreneurs can improve their chances of raising funds by understanding the interests and fears of VCs.
Now before you go out to approach VCs, you would do well to create a draft of a few questions that you should ask yourself to boost your prospects. Be honest with preparing these questions and even more honest while answering them because you don’t want to kid yourself.
- What makes you think that you need those investors in the first place?
- Do you know someone who is trusted by the investor that can recommend or introduce you to them?
- Have they ever funded any business or individual within your specific niche?
- What are the stages at which they consider investing money?
- How much funding do they generally offer willingly?
- What is so special about you that they should consider you for funding and not someone else?
Be ready to network
You should remember that VCs interact with industry leaders, CEOs and other leading honchos on a regular basis, which suggests that they have a lot of good contacts. Interestingly, they leverage these sources of information to obtain ideas, information about deals and get insights into insider information that can go for or against you. This is why a friendly introduction from someone who is known to the VCs can make or break the deal for you.
Whether you agree or not, there is nothing like establishing meaningful networks with those who can approach investors in a strategic manner. Hence, do some intelligent networking on LinkedIn or Facebook or even alumni networks as opposed to indulging in useless cold emailing. This is particularly true in cases when you know that the VC is undertaking due diligence on your business and a word of acknowledgement or encouragement from a trusted source can help you crack the deal.
Be proactive and respectful
When you sense that the VCs are excited about your business proposal or think that there is some merit in it, they would want to take look at all pertinent sources of information/documents. Here, you may want to ensure that you have all the information at your disposal even if they merely express a hint of appreciation. Don’t waste any time before following up with them and taking things forward.
To that end fundraising is akin to going on a date with a potential partner and it is important to maintain the sanctity and duration of that association and not make any goof ups, should things go sour. A VC can easily get upset or disinterested if materials and reports are not sent on time, as per your assurance. Know that there are plenty of firms that are hankering after investment, and there are only a select few that are able to get any finances. The number of VCs is also fairly limited, so make the most of any opportunity that you grab hold of.
At the same time, VC companies entail layers of hierarchy premised upon the edifice of respect. When you approach a VC for funding, ensure that you treat EVERYONE with utmost respect, regardless of their designation and position in the company. VCs are astute enough to pay close attention to the manner in which entrepreneurs engage with non-partners or mid-level employees.