Sarah: What's the best way to build relationships with VCs?
For better or for worse, raising capital from venture capital firms is more complicated and time consuming than applying for a loan at the bank. We can assess your financials and the market opportunity, but more importantly we want to get to know you, the entrepreneur, and how you operate. With that in mind, it’s important to build relationships with potential investors early – it’s much easier for us to write a check to an entrepreneur that we’ve gotten to know over an extended period rather than someone we met at a fundraising pitch a few weeks earlier. It’s to your benefit as well – the relationship building period isn’t just for us to see how you operate, but for you to assess if we would be value-added investors and contribute more than just capital. So to build a relationship with VCs I suggest that you:
- Get an introduction – We get a lot of requests to meet, and, candidly, it can be hard to prioritize our time. You’re much more likely to get your foot in the door with an intro from someone we know and trust.
- Be open and honest – Many entrepreneurs are constantly in “sell” mode when talking to potential investors, and highlight the positives but significantly downplay the challenges their company faces. I find it much more productive if the selling is balanced with an explanation of some of the issues you’re working to solve as well. We understand that every company has challenges that it needs to work through. Be open and help us understand these challenges and what you’re doing to mitigate them – it will enable us to see how you operate and allow us to potentially find a way to help you out (through intros, lessons learned from other companies we’ve worked with, etc.).
- Keep a dialogue going – While you’re focused on winning customers and building a business, spending time building relationships with VCs outside of a fundraising process may feel like a time drain. You need to judge the appropriate frequency and depth of interaction, but it can be helpful for us to see your progress and for you to judge our value-add and level of interest. A monthly or quarterly update email/newsletter can be helpful and is a relatively light way for you to keep several VCs engaged at the same time. When you have a more critical business decision that you’re mulling over or think we could be helpful in a particular area, then it may make sense to schedule a quick phone call in order to ask advice, get an intro, etc.
- Continue the cycle/make your own intros – In my first point of advice, I suggested that you get an intro to VCs. As you develop a relationship with VCs over time, help out a fellow entrepreneur by making an intro for them. This helps build our deal flow and gives you another good point to engage with us.
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