” For an initial investment, you might start by looking for friends and family to invest. You may then branch out to angel or angel syndicate groups. Another option to consider for early-stage companies is Crowdfunding available through platforms like AngelList and Fundable. The next step would be a venture capital investment.”
“Let’s jump ahead and assume you have already secured early funding from friends and family and/or an angel investor or group, and you are now looking to take in a formal round of funding through venture capital.
“Look for the smart money. By this, I mean, you need a formal approach to seeking funding from a venture firm. First, you will need to research venture firms and the partners within the firms to identify those who are focused on your space. Your initial research should include reviewing the venture firms’ websites and their current and past investments and success. Review the partners in the firm and see who has taken the lead on companies in your space and note the board seats they have taken for the investments they have made. In-depth research ensures you will be talking to the right venture firm and find a partner who understands your idea, business focus, target market, and go-to-market strategy. The right venture capital firm will be a trusted partner and a resource for much more than funding. Their insight, advice, connections, and support will be invaluable, and one of the keys to your company’s ultimate success. As a bonus, the right venture capital firm may also have insight into would-be competitors of which you may not be aware.”
“Research each firm’s portfolio companies by visiting their websites, news, and press releases. You can also visit the US Government’s Edgar website to see reports, statements, and investments. And, websites like Crunchbase will show specific funding rounds, dates, and funding levels.”
“Once you identify the right venture capital firms to approach, go into your network and find out who is tied to these key firms and partners to help you approach them for investment. Start with your Linkedin network and ask for introductions from your connections to 2nd and 3rd level contacts. It is key to have advocated getting warm introductions into your target VC firms.”
“When you are approaching a venture firm or partner in the firm, here are a few key things to consider. Are you ready to do a formal pitch, or are you still looking for feedback? After a warm introduction, some venture firm partners will be willing to take an informal meeting to hear about the company and provide feedback on your presentation. This removes the pressure of a formal pitch and gives you an opportunity to perfect your presentation in preparation for a formal pitch.”
“When getting ready to present to a venture firm, come in with a clear objective. The venture firm’s website may list their criteria for investment and provide pitch guidelines. For example, I am a limited partner in G20 Ventures in Boston, and, as you can see from the G20 Ventures website, they state exactly what they want to hear in your pitch or presentation. Whether you are formally pitching or having an informal meeting, you will be asking for feedback. You can also ask for recommendations on one or two other venture firms you should speak with. Venture firms may know others whose investment strategy aligns with your focus and/or whom they have co-invested with prior.”
“It is also important to know some of the particulars about each venture firm’s current funding cycle. Are they at the beginning or end of the current fund? If they are at the end, are they looking for new companies to invest in, or are they using the remaining funds for follow-on funding for their current investments? If they are not taking on any new investments, are they in the midst of raising their next fund, and, if so, when will they be ready to take on new investments?”
“As you go through this process, you will gain valuable feedback, hone your story and presentation, and build your confidence. It takes some time to find the right investment partner. Still, with a smart approach, you can shorten the process and dramatically increase your chances of success.”
Alec Stern has more than 25 years of experience as a founder investor and hyper-growth agent for companies across various industries. He is an innovator with extensive expertise in growing and scaling companies, startup and operational growth, go-to-market strategy, strategic partnerships, and more. As a primary member of Constant Contact’s founding team, Alec was one of the original 3 who started the company in an attic. Alec was with the company for 18 years from start-up to IPO, to a $1.1 Billion-dollar acquisition. Alec has also been a co-founder or on the founding team of several other successful startups, including VMark (IPO & acquisition) and MOST Cardio, amongst others.