It's who you know: Another challenge facing Tannenbaum and Cohen: The professionals are chasing more deals and are being chased more actively by entrepreneurs. That means they're more likely to say, "I saw one of those yesterday-no thanks." Another side effect of the high demand is getting and keeping the VC's attention. "You are not given the opportunity to present your deal for an hour and a half," says Tannenbaum. "You get the feeling that you have about five minutes, and, if you don't capture their imagination, it's over."
The solution to this dilemma is getting an introduction. The fact is, professional investors will be more courteous and more likely to offer quality time to referred opportunities than to cold ones-even if it's only to stay on the good side of their own contacts. Tannenbaum's initial experience bears this out. "Who you know is vital, which is why we spend time trying to expand our network. When we've gotten introductions, it has led to a much better initial meeting."
Experience levels: "Individual investors believe in you and invest in you as a person," observes Tannenbaum. But on the other side, the professionals make their living by evaluating deals and making offers. There's much less emotion and a lot more process involved, which can be a good thing because this is often good business practice. However, the hard part is that all this professional experience might cause investors to be rigid in their thinking about how a deal should be structured and closed.
There are a couple solutions to this dilemma, but you'll find them lukewarm at best. First, swallow hard and go with the flow. Second, try to find out beforehand how the firm structures its deals. Armed with this information, you're in a better position to take certain things off the table before they even become a part of the negotiation. A good way to find out how past deals have been structured is to contact the founders of companies that the VC has funded. (You can find this information on almost any VC's Web site.) You may be surprised at their willingness to talk. And when the VCs find out you've been researching their deal structures, it could be helpful.