“The number one issue for a venture capital firm that covers Europe is to find the needle in the haystack and not get drowned by noise” – Fred Destin, Accel Partners
Whereas tech execs hide their badges, and some investors take no meetings with startups trying to raise funding at tech conferences like Dublin Web Summit, startups themselves have quite a different view of their own capacity to access capital.
Meeting with lots of founders, I see a growing misconception between perceived accessibility, and actual availability of investors. This is especially true among startup founders at accelerator programs, e.g. while back I was asked by an accelerator company to reach out to
“private persons and family offices that are only accessible through personal connections and do not have a huge public profile.”
The company would approach institutional VCs and other accelerator programs themselves, and didn’t think additional introductions were necessary. I’m fully aware of that introductions by me might not be considered to add value to everyone, but what struck me was
the overall sentiment that introductions are not needed as long as investors are publicly accessible.
As accelerator programs serve primarily as filters to the venture capital industry, startups have, for a reason, bought into the idea of being “the chosen ones” along with the promise of getting access to an investor network. As part of an accelerator program, you can expect to be tracked by investors, but it takes more to become special and cut through the noise.
This is what has changed in venture capital and fundraising during the past few years:
- Information about investors, venture capital markets, and fundraising has multiplied and become more available, enabling entrepreneurs to better prepare for fundraising and target investors relevant to their business. (You’re expected to be prepared!)
- Investors have become more digitally present and accessible. (Not to confuse with availability)
- Rise of accelerator programs has led to more standardized and transparent terms in early stage fundraising.
- Venture capital has become geographically more mobile. Hunt for extraordinary entrepreneurs is now a real-time global race.
- You’re being tracked. Venture capital is becoming increasingly proactive and has more tools to track your company. Max Niederhofer, partner at Sunstone Capital, mentioned in a conference talk earlier this year, that Sunstone has developed an internal deal flow intelligence system, which has enabled the firm to increase number of companies tracked and processed from 1K to 3,5K per year. More importantly, the system spots out the top ten companies the firm should be focusing on.
This is what hasn’t changed:
Business is about building trust and relationships. Trust and relationships lead to introductions. Introductions lead to funding.
The following three examples speak loud and clear why there’s really no way around raising venture capital funding without building a network and personal relationships. I’d also like to emphasize the fact, that these three investors belong to the savvy and forward thinking ones in the venture capital industry.
“Number of Accel-funded startups where contact came from cold email: ONE.”
“We’re open access, our emails are on the web site, but the best way is always to be referred by an entrepreneur we’ve backed and we trust, or an investor that we’re close to. That’s the best way. You can always find us, but the best way is through someone we know.”
Philipp Moehring, Europe AngelList, and Venture Partner at 500 Startups, the two poster children of modern venture capital. AngelList is a platform aiming to democratize fundraising process and make it more efficient. 500 Startups literally flies over the world to meet with entrepreneurs, and have to date invested in over 1,000 companies from more than 50 countries:
“I will mostly invest in companies and founders in my extended network. I have learned that I get access to the best deals that way.”
How To Get In – Your Homework
Your homework: Fundraising Hacks by Fred Destin. Slide 20 “Get in” is the one you need to study until your eyes are bleeding. I’m not joking. Apart from the Don’ts, pay special attention to “Multi-target the same person”. You want to create a strong incoming signal from several trusted sources.
There’s no magic trick: Whenever you read a story about a funding round, especially an European mega round, do a run-down of the funding history and you’ll see it didn’t happen out of the blue. In the case of Blablacar, on top of having a #musthave stellar product and team, it’s a company ten years in the making, with early backing from a trusted French investor, and a co-founder who used to work as a VC. Build network and trust: Check.
Would you happen to have the opposite problem, i.e. dealing with inbound VC interest, James Wise of Balderton Capital has put together a neat survival kit, including an email template to manage ongoing conversations with investors. Read also advice from Carl Manneh, co-founder of Mojang, creators of Minecraft, back in the days when VCs were trying to throw $ at them.
One more thing: Be a person. Have respect for everyone’s time. Apply double opt-in intros.
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Paula is Digital Product Advisor and Top 100 Women in Tech in Europe, focusing on Product, Go-to-market, and Internationalization strategies. Rated as one of the very best startup mentors in Europe, she has to date mentored over 150 digital technology companies on product, marketing and growth. Pick My Brain! is her fixed price service tailored to early stage startups, gender wage gap adjusted for female founders. Contact Paula for digital strategy work or book her as keynote speaker about #Startups #WomenInTech #GenderEquality #Entrepreneurship. Read more about her work and connect @Twitter, @LinkedIn. “You never learn anything when you speak, only when you listen” – Roelof Botha / Douglas Leone, Sequoia Capital