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April 05, 2007

How to Get the Attention of a Venture Capitalist

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At the Elite Retreat I gave an off-the-cuff answer to a question concerning getting the attention of venture capitalists. My buddy Wendy Piersall blogged about my answer, and it was a very popular. However, to truly help entrepreneurs, I’d like to provide a cogent list of the tips to get the attention of a venture capitalist.

  1. Get an introduction by a partner-level lawyer. He should work at a firm that does a lot of venture capital financings like my buddies at Montgomery & Hansen. Best case email/voicemail: “This is the most interesting company I’ve seen in my twenty years of legal work for startups.” Venture capitalists dream about calls like this—it’s the equivalent of a scoring shot that knocks the goalie’s water bottle off the top shelf.

    Incidentally, this part of the reason of why you should pay top dollar and use a well-known corporate finance attorney instead of Uncle Joe the divorce lawyer (even if he handles venture capitalists’ divorces). You’re paying for connections not only expertise.

  2. Get an introduction by a professor of engineering. Best case email/voicemail: “These students are the smartest ones I’ve ever had in twenty years of teaching computer science. Larry and Sergei would have carried their backpacks for them.” Arguably this is even better than the lawyer’s call if the school has a history of receiving multi-million dollar donations from its alumni—if you know what I mean.

  3. Get an introduction by the founder of a company in the venture capitalist’s portfolio. Best case email/voicemail: “My buddies are starting a new company, and I think it’s really cool.” For this to work, it would help if the person making the call is a successful company in the venture capitalist’s portfolio. Also, this would be a good time to tap your network in LinkedIn to find acquaintances in the portfolio.

    Here’s a power tip regarding getting to venture capitalists using LinkedIn. Maybe it’s only me, but I hate when a connection of a connection of a connection wants me to take a look at deal. LinkedIn enables you to just go direct, and that’s my advice if you can show success (see below). If you can’t show success, the connection of a connection of a connection is useless anyway.

  4. Show success. Suppose you can’t get any of the introductions mentioned above. Then the most compelling email/voicemail that you provide is this: “My buddy and I have been working in our garage, taking no pay, and with MySQL we built a site that is doubling in traffic every month. Right now, we’re at 250,000 page views a day after thirty days.” With this one sentence you’ve proven you can (a) make a little bit of money (“none”) go far, your architecture looks scalable so far (once in my career I’d like scalability to be a problem), and most importantly, the dogs are already eating the food.

    Another way to show success is to hit it out of the park at Demo or the poor man’s Demo we call Launch: Silicon Valley, but this is a game that only a few dozen companies can play in every year. Finally, you can provide links to articles singing your praises, but this only means that you fooled the press, not that the dogs like what you’re serving.

  5. Make sure your company is in the right space. No matter how you get to the venture capitalist, make sure that she is the right one for you. For example, if you have the cure for cancer, contacting a firm’s enterprise software guru isn’t the brightest idea, so get on the web and do your homework.

  6. Use a short email. The ideal length of your email is three or fourth paragraphs:

    • What does your company do?

    • What problem are you solving?

    • What’s special about your technology/marketing/expertise/connections?

    • Who are you?

    Here are some things not to do:

    • Attach a PowerPoint presentation. I don’t care if it even adheres to the 10/20/30 rule. Save it for the face-to-face meeting.

    • Use the word “patented” more than once. All it takes to file a patent is $1,000. No good venture capitalist believes patents makes your company defensible. They just want to learn (once) that there might be something worth patenting.

    • Claim that you’re in a multi-billion dollar market. Isn’t every company in a multi-billion market according to some study? At least every company that’s ever pitched a venture capitalist.

    • Provide a lofty financial projection. Most projections that I see show how you’ll grow faster than Google. Frankly, I wouldn’t provide any projection at all. It will be either too low and make your deal uninteresting or too high and make you look delusional.

    • Brag about an MBA degree. Most venture capitalists want to invest in hardcore engineers at the start. The MBAs can come later, so focus on engineering or avoid the subject completely.

    • Try to create the illusion of scarcity. Many entrepreneurs claim that “Sequoia is interested.” If Sequoia is interested, you should take its money. If it isn’t, then the venture capitalist won’t be either. Either way, don’t even think of blowing this smoke.

This posting is merely about the process of getting across the moat. To learn more about what to do once you’re there, read how to fix your pitch by Bill Reichert of Garage.


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Comments

Hi Guy I agree with what you have said here in this post. I am the CEO of a pre-revenue Saas company in Canada. One thing that I have found in Canada is that our VC's and Angels are no where near as aggressive. They usually wait for an American firm to lead on large investments before they will jump.

So I would add to this if you are Canadian and looking for money start talking to US VC's as well as Canadian ones. If you have a god idea it becomes more about relationships than your idea.

Hello Guy,

excellent tips, especially regarding email brevity and "what not to send" in those emails.

i know that sending an investor presentation or exec summary across the wire is a big no-no, but all VC's have a eMail address for submitting plans posted prominently on the contact page and there are so many VC's to cover that personal connects are not always possible.

I would be very interested in getting you thoughts on how, if you are going to use this channel, to grab some attention and not waste time.

Is it better to just eMail (in accordance with #6) and not attach anything, to gauge general interest, or to send w/attachments and pray?

This is unless of course you are trying to find funding for a service based business. In which case...you can expect a much tougher road.

Hi Guy, I love your blog and books (of course)... I have one question for you though... how much "weight" is given when accessing a company (invest vs pass) to you put if the company already has other VC or venture capitals already invested into a company. Also, how much do you "value" the amount of pure sweat equity put into a company by the founders, results or not?

Thanks,
Jon
Founder of myfoodcount.com - free & anonymous health monitoring

from an event we ran last week with some notable UK startups, it seems like being buddies with a name (like Microosft even!) can be helpful. That's what happens when you open the kimono a little - http://blogs.msdn.com/stevecla01/archive/2007/04/03/microsoft-uk-opening-the-partner-kimono.aspx

Which task is more difficult: finding a venture capitalist or finding a literary agent? It seems like those two professions have the most “rules” for how to approach them! Of course, that is probably because there is more junk than good stuff in both fields.

Here is another great resource about "Hacking VC"

http://www.venturehacks.com/

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