Venture Capital 101: "Ask for advice, not money" (and why relationships matter)

If you're an entrepreneur or emerging manager looking to raise funding, there's one piece of advice that is worth keeping in mind:

"If you want money, ask for advice. If you want advice, ask for money."

This quote, often attributed to uber-successful venture capitalist Steve Jurvetson* (more on Steve in the footnotes), is a reminder that building relationships with investors is crucial to raising capital.

Building relationships with investors is not easy. You need to find the right investors who are interested in your industry and have the capital to invest in your business. You need to convince them not only that your business has potential but also that you're the right person to lead it. And you need to do all this while juggling the day-to-day operations of your business.

One of the best ways to build relationships with investors is to start by asking for advice. This approach allows you to get to know the investor, learn about their background, and understand what they look for in an investment. You will also learn from their experiences and gain insights that can help you improve your business.

When you ask for advice, you also signal that you are not just looking for money, but that you are interested in building a relationship. You are showing that you value their experience and that you are willing to learn from them. This can be one of the most powerful ways to build trust and credibility not just with potential investors but with your community at large - something that will pay back dividends in the long term.

But the key to making this strategy work is to be genuine. You should be sincere in your desire to learn and improve your business. You should also be willing to take the investor's advice seriously and implement it where appropriate. If you only ask for advice as a way to get in the door and then quickly pivot to a funding pitch, you risk damaging the relationship and hurting your chances of securing funding.

The "ask for advice, not money" approach can also be applied to raising a first venture fund. In fact, many successful venture capitalists have used this strategy to build relationships with limited partners (LPs), the investors who provide the capital for a venture fund. By seeking advice and guidance from potential LPs, a first-time fund manager can gain valuable insights into the industry and build trust and credibility with investors. This approach will also help a first-time fund manager to refine their investment strategy and identify potential co-investors.

In the early stages of building a venture fund, it's essential to build a strong network of relationships with potential LPs as well as peer VCs. This can involve attending industry events, participating in accelerators or incubators, and seeking introductions from industry insiders. By building a rapport with potential investors and seeking their advice, first-time fund managers can increase their chances of securing the capital they need to launch and grow their fund.

In summary, the "ask for advice, not money" approach is a powerful way to build relationships with investors, whether you're seeking funding for a startup or a first venture fund. By showing a genuine interest in learning from investors and building a relationship based on trust and credibility, you can increase your chances of securing the capital you need to grow your business or launch your fund.

*Steve Jurvetson co-founded Draper Fisher Jurvetson (DFJ). He has a long track record of successful investments, including Hotmail, Tesla, and SpaceX. His investment in Hotmail, in particular, is considered one of the most successful in the history of venture capital. Jurvetson is known for his forward-thinking approach to technology and his ability to identify innovative companies with high growth potential.