In whichever way you are involved in a start-up enterprise of any sort, you know that the most valuable insights and advice come not from your mother but venture capitalists. After all, these guys have seen more business world than you have in the initial stages. These are the guys who can be looked at for value add, who can open doors, help you connect with right people in the industry.
The very basic question : How do VCs come across their investment ideas ? Perhaps the word will resonate often in the post – Network. The well established VCs enjoy a good network. And honestly it helps rather than being a lonely bird. It ain’t series of emails over internet. But a good and healthy network where they know the people they know and entrepreneurs constantly communicating, conversing and where they find out right elements.
Woody Allen quoted, “Life is 90% showing up”. So show up ! When you have the opportunity to communicate, do so by being together in a room. Get to meet in person. They will try to talk to you over phone, skype. But the fact to understand is that they try to experience the magnetism and spark of the founder. And that cannot be well assessed over audio or computer screen.
Be very thorough and forthright about competitive landscape. When VCs know more than the person presenting his own idea or business model, it’s a cause of worry. The facts and numbers should roll off your tongue as fluently as uttering I love you to your girlfriend(wife’s out of picture certainly !).
Personally, if you don’t have any experience, approach them with some real progress. Your start-up should have caught many eye-balls by now. If not, think and work harder.
An entrepreneur-VC relationship is akin to a good marriage. When VCs make an investment, they know that the relationship can potentially last for 8 to 10 years. Hence, to have a good partner is crucial. Therefore, get to know who will be on your board. Earn their respect. Generally, it’s one or two investments annually per partner. So if you have the opportunity to meet a person, you’ve got to stand out to be that person’s deal for one whole year. Get to know how much investments they’ve made, how many boards they are on, do they miss board meetings, do they send analysts instead of coming by themselves, etc. Equally important is analyzing their investment history.
If possible, get to know where the money is coming from. The fatness of the investment figure determines the ideology and mindset of VCs and Angels right from the start. If the investment is around 1 crore, they will look for scaling up to a certain extent and sell it to big companies for higher returns to as much as 100 crores. That’s that. Quick sale and no IPO. But when the investment itself is 1500 crores, they will swing for the fences and bypass the early acquisition factors as they won’t matter for huge inputs.
All in all, the conclusion is –
- Get to the main points
- Demonstrate passion and commitment
- Make sure you state the value proposition in a concise & simple manner