A Quick Guide to Finding a Venture Capital Match
"You can do it!" This is what I say to big-concept entrepreneurs who want to raise startup and expansion capital from venture capital funds. From a solicitation standpoint, you can increase your chances of success by approaching a long list of funding sources. Most first-time fundraisers make the mistake of pursuing a short list of funds, sometimes just one fund at a time.
Sequoia Capital, Kleiner Perkins Caufield & Byers, Polaris Partners, Bessemer Venture Partners and Andreessen Horowitz are large funds that invest in a broad range of businesses. If your company matches the investment criteria of these funds, certainly connect to the individuals within these bigger funds who specialize in your industry. But be sure to add other VCs to your solicitation list, too.
Here's how to do it:
Regional firms. Many large venture capital funds consider investment opportunities from anywhere in the U.S. However, in practice, VCs prefer to invest close to home because it's easier to stay in touch with local entrepreneurs. VCs travel enough as it is and don't want to travel more unless they absolutely have to.
To boost your chances of funding success, do everything you can to appeal to regional investors. If your business is located in the Southeast, check out Diamond State Ventures, BVM Capital, CapitalSouth Partners, LongueVue Capital Partners, Massey Burch Capital and Intersouth Partners.
If you live in the Pacific Northwest, research Madrona Venture Group and Montlake Capital. Open Prairie invests in software, life sciences and communications businesses in the Midwest.
Funds that invest in Northeast or Middle Atlantic state businesses include Grotech Ventures, Mid-Atlantic Ventures, Ben Franklin Technology Partners, Milestone Venture Partners and NewSpring Capital.
Seed-stage funds. I have to give a shout-out to funds that invest in seed-stage companies. These funds accept more financial risk and responsibility for helping entrepreneurs navigate the tricky trial-and-error process of transforming first concepts into viable commercial products.
Some seed-stage funds to investigate include M/C Ventures, Launch Capital, CambridgeLight Partners, Bee Partners, Cedar Fund, New Enterprise Associates, Floodgate, Pod Venture Partners and Crosscut Ventures.
Industry sector funds. Yes, there are VCs that invest in a "broad" range of industries, but your chances of funding success increase if you appeal to funds that specialize in your industry.
For example, Trident Capital, Chart Venture Partners, In-Q-Tel and OnPoint Technologies invest in security- and defense-related businesses. Active energy and clean-tech funds include Khosla, Nth Power, Massachusetts Green Energy Fund, MissionPoint Capital Partners and CleanTech Partners.
Funds that invest in media and entertainment businesses include Hearst Interactive, Comcast Ventures, Lerer Ventures, Elevation Partners, Redpoint Ventures, Downey Ventures, InterMedia Partners and more. Active life sciences and health care funds include Hatteras Venture Partners, TPG Biotech, NDI Healthcare Fund, SV Life Sciences, Pfizer Venture Investments, ARCH Venture Partners and Oxford Bioscience Partners.
Information technology businesses have a long list of venture capital funds to solicit for seed, early or expansion capital. Funds that "invest in the space" include SAP Ventures, Sevin Rosen Funds, Intel Capital, Oak Investment Partners, Greylock Partners, Highland Capital Partners, North Coast Technology Investors, Entrepia Ventures and Flybridge Capital Partners.
Don't get discouraged if your first solicitation doesn't turn into fast funding. Investors like to take their time to understand an investment opportunity and why you're perfect to lead your company to greatness. Keep at it. Your job is to educate as many potential investors as you can. This networking and active solicitation process won't end after you secure a first round of funding, so it's good practice. Chances are you'll be talking to lenders and investors right up until the day you sell your company.