Recently Minal Hasan, a startup lawyer, shared some tips with entrepreneurs on how to effectively get introductions to VCs. You can read the full article on VentureBeat here.
Personal connections play a huge part in how entrepreneurs get connected to capital, especially when it comes to getting an equity investment from VCs or angels. When I was a VC, the vast majority of the entrepreneurs I’d meet came from introductions or referrals from my personal network. Others came as a result of me doing the research and legwork to find the kinds of companies that fit our criteria. And none came through the info@… email address on our website. (Has that ever led to VC funding?)
Getting an effective introduction is a constant struggle entrepreneurs have to overcome. Here’s what makes it hard:
A club with difficult membership access
Unlike a gym where you can just pay a small fee to become a member, the VC world is harder to penetrate. It’s a pedigree game. Did you go to school with people who are now VCs or successful entrepreneurs? Without intros from people like this, it’s tough to get in the door.
VCs seek a profile
Big market, big team, big idea, big data, etc. Since VCs are looking for homerun investments, making at least 10X back what they put in, you need to prove that your business has the potential to generate huge value. Do you have a market that’s larger than $1 billion? And team and technology that will make you the market leader? Can you grow to $100M in revenue in 5 years? Maybe, maybe not. The problem is, there are lots of really great businesses led by great entrepreneurs that just don’t fit these criteria. VCs are unlikely to fund them.
What’s the process?
Most entrepreneurs are not familiar with the VC funding process and don’t know how to prepare for it. It’s always difficult to decide whether you should spend time raising money or building your business. It takes a long time to raise capital, and entrepreneurs are shocked when they find out that raising money from VCs is incredibly rare and can take 6 months of full time work. Entrepreneurs have to dedicate a big portion of their time to creating business plans, financial projections, pitch decks, and product demos. That’s time they could spend running their business.
At Lighter Capital, we strive to provide an easier, friendlier, and “lighter” funding experience for the entrepreneurs because we know first hand how difficult it is to raise money and how precious time is to entrepreneurs. Solving that problem is why we exist—our tech-enabled funding process is designed to be faster and lighter, and we can get you funded in a month. If you are curious about what we offer and if you may qualify, go here!