VCs can be your most important partner in building a successful technology business. Rick Segal at JLA Ventures is a rising star in the VC world and someone you should know. He recently wrote a post "The New VC Handbook" explaining his philosophy on the VC - entrepreneur partnership. Fred Wilson also wrote a post today on the same subject entitled "The VCs Customer". Fred's post explains that they see about 1,500 company proposals per year and invest in four or five. That is going to leave lots of potentially unhappy customers. I strongly encourage you to read both articles to learn the VC side of the process.
Here is a teaser from Rick's post "So, I’ve been working on a bit of a VC playbook. In my view, it’s the way VCs today are going to have to think and act if they want to play with the really smart kids. I’m sharing because I think you, as a start up, need to evaluate us with the same rigor we are supposed to be evaluating you and these ‘rules’ from the playbook might give you some points to think about."
I work with VCs everyday. In my opinion they are the strongest advocate for your business you will find. They use their network of contacts to promote your company, find great people to join your company, uncover potential strategic partnerships, and find potential big customers for you. They have money in your company and have a vested interest in making you successful.
In an earlier post "Should I Take Venture Capital Money?" I covered some of questions you should ask before taking VC money. Another post covered "Angel Investors for Seed Stage Capital" How you finance your company can have a direct effect on your success. Investors are your partners, and they can each bring something different to the table. Take as much care choosing your investor partners as you do hiring key people or making technology decisions.
Start looking for capital long before you need it. It takes much longer than you think it will to find the right investment partner, perform the "due diligence" and close the deal. The VCs are very busy people. They are working to make their current companies successful and have limited time to investigate new companies. The process takes much longer than you think it should.
However, as an entrepreneur, you should take ample time to evaluate potential investors as well. Don't necessarily take the first one that comes along, or the one that offers the best pre-money valuation. Think about what they bring to the table and how you will be able to work together in the future.
I work with some outstanding VCs and Angels in the Boston area. If you are a software company building on the Microsoft platform, and you need help finding a VC or Angel partner, send me an email (my address is in the ABOUT section) or leave a comment below.
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