Written by Clairine Runtung
Fundraising can be a long, tedious and tiring process for entrepreneurs, especially when capital runway is tight. On top of usual business operational activities, fundraising can be frustrating if you do not prepare in advance with strategy in place. Typically, it takes about 6 – 8 months to successfully close a fundraising round.
If you decide to raise funding from VCs, how should you go about approaching them?
Cold Emails: A Good Option to Start, Though Not The Best Way
Many venture capital websites have an instruction that will tell you to submit an investor pitch deck to a generic email address cited on the website. Does this work? While there have been success stories when approaching VC this way, it might not be the most effective way. A venture capitalist receives in the range of 20 – 50 (often times more) cold emails and phone calls in a week – this is in addition to internal and other emails. If you would like to use this method as a starter, make sure your email is properly written and concise, if it’s not catchy enough to gauge the VC’s short attention span you’ll likely not get any reply.
Networking Events: Choose Wisely
Going to networking events organized by co-working spaces, conferences, and workshops will help you meet new people, including entrepreneurs and investors. Although this is a good way to get access to a venture capital, be careful not to do it too often as they can be very time consuming and costly. Hence choose your go-to events wisely. Going to networking events can be addictive, but keep in mind that focus is still the ultimate priority when building a start-up. Research the type of networking events you are about to go to, and if possible, find out if any VC you’ve been wanting to talk to will be there. Bring more than enough name cards, and be prepared with a simple elevator pitch—straight forward but light enough for a casual setting. One way to ensure you can meet the venture capital is to go to their panel session and approach them right off the stage. Typically, you’ll at least be able to get their name card this way.
Another suggestion: when it comes to start-up networking events, go if there are customers and prospects there. Spending time with your customers will not only help your business, but also it will bring you more exposure. As part of their research, VC themselves often ask consumers who are the promising businesses these days — the more you talk to your customers, the better chance that your business will be heard of by the VC community.
When you do get to meet these investors in person at the networking events, ask for his/her name card and follow up with an email straight away (24-hours rule of thumb). If you happen to strike up a conversation with the venture capital on a particular topic during your first interaction, you should also mention it over the email to help the recipient recall who you are.
Referrals: Effective Way to Meet and Build Relationship with VC
Referrals is by far the most effective way to get into VC’s doorstep. Through experiences, venture capital believes that most good deals come through a trusted source. This highlights the importance of getting a referral: a proper one can dramatically increase your chances of getting a meeting with the venture capitalist. A VC firm is usually a small team and they receive more than 20 funding requests in a week. Out of those requests, VC usually meets 20%-30% of them. Getting a referral bumps up your opportunity to be within that top circle. In case you are wondering, VC prioritizes the ones that have been referred by someone the team trusts, because —simply put— the referred start-up has been pre-screened by someone whose opinions are respected.
Who can that “someone” be?
VC tends to spend time with anyone that is related to start-up industry. You name it: CEOs or co-founders of other start-ups, start-ups’ recruiters and lawyers, and most of all, the VC’s specific portfolio companies. With the help of social networking tools such as LinkedIn, Twitter, Facebook or just plain old Google Search, it won’t be difficult to get the information you need to get to the VC you want. Once you have found somebody who knows the VC, develop a relationship with that person (if it has not been done yet) and find a way to get him/her to introduce you to the VC.
In general, you can always find a way of getting access to a venture capital. However, do it with a good well-thought out strategy, so you can be sure of a healthy timeline to keep your fundraising goals in tact while running your start-up’s business as per usual. Most importantly, show strong passion and trustworthiness. As with other matters in professional life, respect and integrity play a fundamental role during fundraising process.
Photo credit: www.andertoons.com