Many VC websites have a tab that will tell
you that you can submit your business plans to enquiries@vc_company.com
or some similar generic email address. But does it really work? Can
you really send your business plan over the transom
and expect to get a positive response? The short answer is “no” –
don’t waste your time. I know some VCs would take issue with this and
somehow I’m sure that there are some success stories with this method
but trust me this is worst way to approach a VC.
Why is it a bad idea? Most VC firms receive an unbelievable number
of business plans every year. It really is hard to process them all
effectively so some sorts of filtering techniques develop. I remember
asking for advice from a law firm in 1999 (before my first fund raising
exercise) the best way to approach VCs. He told me that “most VC’s
will figure that if you are truly an entrepreneur you’ll find somebody that
knows them, develop a relationship with that person and find a way to
get them to introduce you to the VC. If you can’t do that then you’re
probably not really an entrepreneur.” It sounded a bit like an “old
boys club” to me.
It may sound harsh but in reality I think it’s true. If you can’t
get a warm introduction to a VC then how on Earth are you going to
break down the doors to get to the VP of Sales, Biz Dev or Marketing in
the organization that you’re looking to sell your products to to or
develop partnerships with? If you’re not assertive and creative enough
to get through a VC’s doors then how are you going to get the most
sought after journalists to write your stories or the most skeptical
buyers to part with their hard-earned cash? And we expect you to be
able to persuade potential employees to join your cause when you can’t
pay them properly, they’ll need to work crazy hours and you’ll always
be 9 months away from bankruptcy. In short, in most cases being an
entrepreneur requires a healthy dose of Chutzpah.
And when I speak on this topic in public I like to remind people
that, “when I raised capital there were no easy ways to figure out who
were the friends of the VC’s (let alone who the VC’s were in the first
place) but in 2009 you have alll the social networking tools:
LinkedIn, Facebook, Twitter or even just plain old Google Search.
It’s pretty darn easy. But aside from the obvious social graph
information I’m going to give you a few tips:
1. Start-up oriented, corporate lawyers.
VC’s deal with corporate lawyers all the time. We deal with them
when they represent us in fund raisings and when they represent the
companies that we invest in. We spend time with them because they
often attend the board meetings of our portfolio companies and we work
with them when we sell our companies or implement stock option plans.
In fact, most great early stage corporate lawyers run in exactly the
same circles as we do. They are often one of the best sources of
early-stage deal flow for VCs because one of the first companies most
entrepreneurs do business with is their lawyers who incorporate their
By the third time I was raising money in 2003 I had already learned
this trick. I called two law firms that I knew well and asked them
about VCs in the Washington DC area (I was considering opening up US
operations for my company and thought we’d raise US capital to do so).
The law firms were able to tell me: who the best VC firms were, who
was investing money and who wasn’t. But even more precise I asked them
about each individual partner – who had influence and who didn’t? Who
got a lot of deals done and who was spending too much time on the golf
course? And I wanted to know who had software-as-a-service (SaaS)
skills and who didn’t. I went even further to ask who was active on
boards and who “dialled it in”? (The Funded
didn’t exist back then). Obviously not every lawyer is going to tell
you all of this detailed of information, but if you spend enough time
with enough lawyers and help them out too (introducing potential other
clients) then you’ll definitely pick up at least part of the story.
And most good VC law firms are good at introducing you to the VC when
2. Start-up focused recruiters
I was recently at a breakfast for the mentoring program that I founded (www.Launchpad.LA)
and I mentioned the idea of our group spending time with recruiters.
Many of the guys moaned. I was surprised. I’ve always loved spending
time with recruiters. Not just because many of them are very social
people by nature but also because they know everybody. And if they’ve
been doing it a long time they know them in ways much better than most
of them ever will. And the best recruiters definitely know the VCs. I
know that recruiters can get a bad rap because there are so many bad
ones, so your job is to identify who are the best. How on Earth do you
do that? Simple: contact the CEO’s of local entrepreneurs and ask!
(see point 4 below)
3. Portfolio companies
Let’s say you’ve identified the VC firm you want to approach and
you’ve gathered a bit of information on them but you still don’t feel
you have the best person to introduce you. The absolute best place to
start is with the CEO’s of their portfolio companies. I’m always
surprised that more people don’t do this. Every VC lists who their
portfolio companies are so it’s pretty easy to figure out a few CEO’s
who know the VCs (and the companies websites normally list who are on
their boards so you’ll even know which partner did the deal).
OK, so if the VC you want access to is Union Square Ventures you
probably don’t want to contact Twitter or Boxee but you could easy
contact earlier-stage, less known companies. Obviously when you do you
should be respectful of their time and find ways that you can be of
help to them also. But the best approach is to ask if you can ask for
a 30-minute coffee slot as you’d love to get a small amount of their
time to learn a bit more about their experiences in fund raising. If
they accept – stick to your limit of 30 minutes and start a
relationship that will hopefully pay off well beyond fund raising.
If you’re not yet in the comfort level to start calling the CEO’s
you might also consider calling the other co-founders who are not CEO.
They are often listed on the websites. Once you’ve had the chance to
meet with 4-5 portfolio companies in a time-respectful way one would
hope that you developed good rapport with at least one of them
(otherwise, revisit the question – am I really the right person to be
an entrepreneur?). At the right point you might consider politely
asking them to intro you to their VC. A warm intro from a portfolio
company is the single best source of lead for any VC.
4. Entrepreneurs in general
Another very obvious source of information is just to network as
widely as you can with other entrepreneurs. Founders often get so
bogged down in getting their products out the door, raising money and
hiring staff that they don’t spend enough time networking more
generally. The best source of advice in general on how to build your
company is from talking with other entrepreneurs who have recently done
it or are currently doing it.
Specifically they will be able to give you tons of information about
local VCs and their experiences pitching them. You can’t rely on the
information of the first one or two you speak with but if you meet with
enough entrepreneurs you’ll be able to triangulate enough to figure out
the good guys and the bad guys.
SO … now that you know how many plans we get from portolio
companies, laywers, recruiters and entrepreneurs in general (not to
mention business school classmates, other VCs, professors, etc.) …
still think your plan randomly submitted has a good shot of getting you