How to identify the right partner to raise funds from Venture Capital firms

I pen this article with the main objective to throw light on a topic which is rarely written, spoken, or discussed in the start-up and funding ecosystem - How to identify the right Venture Capital firm for fund raising

Often, I have seen that start-up founders follow a spray & pray approach when it comes to fund raising. While this is a classical method & may have worked in some cases in most cases it has not led to any results

With the rise of the so-called LinkedIn Experts & self-proclaimed Funding experts who post links with titles such as A link with details of 500+ VC’s from USA, 1000+ VC’s from across the Globe, etc it only makes things more confusing for the founders

Here are some do’s & don’ts for Founders when they are looking for the right partner to raise funds from Venture Capital firms

First the Don’ts:

1.?????If you are approached by a so-called self-proclaimed fund-raising expert who claims to train you in the art of fund raising by charging a nominal fee then steer clear. I have seen this trend where modest amounts like 499 USD are charged to give lectures on how to fund raise and 1000’s of founders have fallen prey. Guess what – The fake scamster just raised or should I say earned or scammed founders of a lot of money

2.?????Angel syndicates – There are some really great angel investing syndicates out there who do great work but a few have mushroomed with the sole objective to make a fast buck & not to get you funding. They charge a fee to register you on the syndicate & then a fee to promote your start-up to members of the syndicate. This is a big red flag if the numbers don’t add up on the stack

3.?????Investment Bankers – There are a tonne of Investment Bankers who shall charge an upfront fee and claim that they shall assist you in creating a so-called amazing pitch decks, introductions with VC firms, etc.. YES, a good-looking pitch deck helps but if pitch decks decided the course of funding then companies that specialize in crating pitch decks would be unicorns

4.?????Focus on Quantity – Cold Calling might work for the banks selling free credit cards but not for you as a Founder. Focus on narrowing down the VC’s after a deep dive & then make a consolidated effort to reach them

5.?????Do no expect over night miracles & stay persistent and remember DON’T PAY TO RAISE FUNDS

Now The Do’s

1.?????Don’t just focus on finding a VC, instead focus on finding a relevant VC

2.?????All VC’s make investments but beyond the money a VC brings a lot to the table such as synergies with their portfolio companies, access to new markets, etc so find a VC who along with funding can add value on other parameters

3.?????All VC firms have an Investment Thesis so do an in-depth research on this. Let me explain this in simpler words

a.?????You are looking to raise a Pre-Seed round of 500k then why waste your time reaching out to VC firms that only participate in Series-A and beyond?

b.????You are a PropTech firm and are approaching a VC firm who invests only in FinTech

c.?????You are based in location X and the VC firm only invests in location Y and Z. Yes, don’t get fooled by the Global Syndrome. When a VC Firm raises money from Investors, they have to specific a geography where the funds would be deployed & however much they might like your product / solution they can’t deviate from what is filed

4.?????A VC takes an introduction from one of their existing investee companies very seriously. Rather than finding VC firms, how about finding a founder who has raised from a VC you are keen to reach out to & routing the deal via the other founder. A strong reference can work wonders

5.?????Study a VC firms portfolio and see what type of companies have they invested into. If you are way too similar to them, it might not make sense as most VC firms won’t invest into a firm which is a competitor to their existing investee companies. This is a double sword though so balance it

6.?????While this is a long shot, do try & figure of it the VC firm has analysts & GP’s who graduated from the same university as you. At times this does help as some VC firms are focused on some universities as they have tasted success in the past from students who passed out from there

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