How to Get an Introduction to Top Venture Funds

Strategies to open doors to leading technology, consumer products, healthcare, internet, and clean tech investors

Q.   I keep reading that entrepreneurs should get a personal introduction to a venture fund rather than soliciting the fund directly. Why do funds do this? Is this some sort of screening process to maintain exclusivity? How can the "little guy" get in the door?

A.   Ok, ok, I admit it. Entrepreneurs who receive venture capital from the nation's treasure chest of seed-stage incubators, early-stage venture funds and later-stage private equity funds are very much a part of an elite group. Only about 5,000 companies nationwide will get funding from institutional investment funds each year.

While I acknowledge there is a certain exclusivity within the venture community, the more traditional benchmarks of social standing such as family name and wealth don't carry much weight among venture capitalists or "VCs." Rather, their doors and checkbooks open to charismatic entrepreneurs who can persuade VCs of their big money making potential.

Because the VC selection process is mostly democratic in a Darwinian, survival of the fittest, sort of way, I'd say there is nothing sinister about a venture fund's request for a reference introduction. Actually, it makes good sense.

Consider this. Venture funds receive dozens of business plans each week. One way to whittle down the candidates to manageable numbers is to create some early performance hurdles to help identify unusually persistent entrepreneurs. VCs know that successful entrepreneurs have to be unflappable problem solvers. Finding a reference is a small challenge in comparison to the competitive traumas of real world business building.

The second practical value of references is to test an entrepreneur's ability to network. VCs call this skill "eco-system development." They recognize that management teams, especially in high technology industries, need to develop technology-sharing alliances and aggressively attract new customers. Good networkers tend to succeed in building these relationships.

Fortunately, most venture funds accept referrals from a wide range of venture community sources. The most meaningful references come from local angel investors, respected investment bankers, other venture capital firms, or professionals who provide accounting, legal, head hunting or advisory services to the venture fund.

So, how can an entrepreneur network to venture funds that are located in across the country? Here, the fast track to an introduction will be through a target fund's portfolio companies.

Follow these time-saving tips:

• Read your target venture fund's Web site carefully. Identify the partners who are responsible for evaluating opportunities in your specific industry. Pay attention to the partners' participation on portfolio company boards of directors. This is your money list!
• Most venture fund Web sites offer links to their portfolio companies' Web sites to help you make these first connections. Contact the CEO or CFO of one or more portfolio companies because these individuals have the most day-to-day interaction with their venture investors.
• When you reach out to portfolio company executives, ask for a brief telephone conference call. Say that you are interested in pursuing venture capital financing and want to learn more about the entrepreneur's experiences with the target venture fund. Of course, ask how the CEO solicited the targeted fund and others. Success is getting the executive to talk more than you.

Overall, your goal is to leave a favorable impression as a venture manager worth a "first look." There is no need to oversell your deal here. Just focus on the basics of your business vision and networking objectives and you will move one step closer to the reference you desire. You can do it!

Do you want to find reliable investors for your business? Write to Susan at susan@takecommand.org for great funding references and tips designed especially for startup entrepreneurs, sole proprietors and fast growth companies.

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