- When you're going out to look for venture capitalists that are going to be relevant for your company, the best source of them is other entrepreneurs who you know who have raised money from venture capitalists. In a lot of ways, the best way to get connected into a venture capital firm is through a referral. And in fact, many venture capital firms rely on referrals to get introductions to potential entrepreneurs. The next thing to do is think about where venture capital firms, at the stage that you're at, spend time. If you're an early stage company and you're a company that's going through an accelerator, for example, you've got sort of built in wiring, when you're going through a Techstars program.
You come out of it at demo day and there's a lot of investors and venture capitalists around you looking at the companies that come out of a demo day program. However, if you don't participate in an accelerator or you're not part of that landscape, find local co-working spaces. Find local networking events. Find other founders of companies that have raised venture capital and start navigating through that network. It used to be that venture capitalists were very concentrated in a couple of geographies, and to this day, still, there's a relatively small number of geographies that have the majority of venture capital dollars being invested.
However, venture capitalists invest all over the world at this point. And even if you're just looking at it in the U.S., the amount of venture capital activity in all the major cities in the country is quite significant. Today, most major cities in the United States have multiple early stage and mid stage venture capitalists, and in any city where there's a meaningful startup community, there's often a number of companies that have raised money from venture capitalists who are regularly coming through that city for board meetings or being involved in the companies.
So recognize that what I'm describing is really very much a network game and you need to build that network proactively. You're not able to just sort of raise the flag and say, hey, I'm looking for money and have a whole bunch of people come to you. Occasionally, an entrepreneur can do that, but generally speaking, that's not how it works. There's also not a list where you can just buy a list and start emailing a bunch of venture capitalists. That's not a particularly effective way to get people's attention. So instead, think about what your network is today and who's in your network.
And if you look at your network and say, gosh, I don't have a lot of connections through my network to potential sources of venture capitalists, start building that network through other successful entrepreneurs and other people in your community, many of whom, again, could be mentors for your company, might be potential angel investors in your company. But anyone who's connected into that system and use them as a connection point for other venture capitalists.
- Exploring potential stakeholders: friends, family, and more
- Finding a venture capital firm
- Breaking down the term sheet
- Taking on debt
- Asking for NDAs
- Accepting a no