Entrepreneurs, especially younger ones, and especially in Europe, frequently complain that VCs move too slowly during the entire funding process. Many claim they take too long when they are approached, when making decisions (including a simple “no thanks, I’m not interested”), and that it is generally tough to get a VC’s attention.
In my opinion, this complaint is valid and the reason this occurs is because many VCs are contacted by far more companies than they can process. This doesn’t automatically mean that VCs are arrogant because they are constantly being approached with interesting investment opportunities, often it simply means that they are not great at handling and prioritising deal-flow. That’s why it’s crucial for entrepreneurs to think hard about how they frame their initial approach to VCs to ensure they get their attention and can quickly begin a meaningful discussion.
I wrote and said a couple of times (here, for example) that it is best to approach VCs via your network – an intro will always beat a cold email and increases the chance of getting VCs’ attention. This way of getting in touch has become easier in recent years as our social networks have become increasingly transparent, making identifying common friends or business contacts straightforward.
While I do believe this is the best way of approaching VCs, I want to make it clear that it’s certainly not the only way that works and leads to faster responses. If you can’t find people who can introduce you to a VC (or if these people ask for money or a big stake in your company just for doing that – this does happen!) you should still approach VCs directly, just make sure you do it right. The magic word is context.
When you approach a VC you haven’t previously met, creating the right context is key to getting his or her attention fast. A warm social recommendation is a great context – it signals that the person making the introduction trusts and implicitly recommends (to some extent) the person being introduced, otherwise they wouldn’t agree to an introduction.
But there are other ways of generating context that can be powerful as well. Here are four ideas:
1. Find the context
VCs will sometimes be very public and specific about what companies they are looking to fund. For example, my partner at Point Nine, Christoph Janz, wrote a blog post about what companies Point Nine is looking for. If you’re working on something that addresses a specific problem or area that the VC is interested in, refer to that in your email and you will automatically create a context that is guaranteed to grab their attention.
2. Research their area
Research what area and stage the VC focuses on, draw conclusions from your research, and refer to that when you address the VC. For example, Point Nine has invested in many SaaS startups, we frequently mention that we are focused on SaaS and that it is one of, if not the, key focus area for us.
So if you are working on a SaaS startup, or a startup that has some SaaS elements, mention this as soon as possible in the conversation and that you believe your company is a good fit for Point Nine. To us, this communicates immediately that you are in our field of interest and signals that you took your time to understand which VC is the best fit – great context.
3. Mention previous investments
Another good idea can be to refer to a specific investment a VC has made previously that is relevant for what you are doing. You can refer to a company an the VC funded in the past, explain how it relates to your project, and why you think your company might therefore be interesting to the VC.
4. How do you know them?
Having met a VC briefly at a conference, heard them speak on a panel, or read their blog post, it makes sense to refer to these to create a context for the initial exchange of ideas.
There are certainly more ideas out there and with some research you’re likely to succeed at generating context for the first email. And don’t worry, we certainly take our own advice when we’re the ones approaching companies for potential investment.
Feature image: „big boss is considering the new employee“ via Shutterstock / copyright: ArtFamily