How to Approach VCs

I got a great set of questions from an entrepreneur (Delena) on an earlier post, concerning how to approach, qualify and follow-up with VCs. I've heard these tactical communication questions a bit more often in the past year so I thought I'd expand upon at least one of Delena's questions here.

Delena asked "How long should one pursue a [VC] firm?" My first answer is to pursue appropriate investors until you no longer need funding, but the devil's in the details.

Chum the Water, Before Baiting a Hook

You've seen those deep sea fishing shows, right, where they throw meat out well before casting a line? This is especially true for shark fishing. Well, given how the popular media likes to equate VCs and sharks (think SharkTank), follow that same approach for engaging VCs. Reach out to appropriate VCs well before you need funding and start a relationship that invites curiosity or informal advice. Share what you're doing, maybe an exciting announcement, and solicit advice, not money. Believe it or not, VCs are much more likely to engage if they're being approached for their "infinite business wisdom" instead of their checkbook. This requires more legwork than just emailing executive summaries, but getting to know VCs before you need money is critical to getting their attention later. This also provides an opportunity to understand a VC's hot-buttons so you can demonstrate progress on those prior to pitching for investment.

Be Persistent, but Polite

Now, once you have baited your hook and cast it out, what if you don't get any nibbles? That period just after submitting an executive summary or business plan to VCs is one of the most uncertain for young entrepreneurs. What does silence mean? How soon is too soon to follow-up? My advice is to be persistent, but polite. Give VCs about two weeks to work through dealflow and review your plan, but after that follow-up weekly in a multi-modal, but polite way. This is a simple concept, but less than 1% of entrepreneurs execute on it. Follow-up emails, phone calls, and even twitter DMs should always stay professional, but push for the next step of call, meeting or feedback. VCs review thousands of plans a year and you want yours on the top of their inbox as much as possible -- each ping gets it another look until they decide a formal next step. In addition to getting attention, this process also demonstrates to a VC how you conduct business -- persistent entrepreneurs win customers, partners and top talent. The worst case of being persistent, but polite, is you get a "no" sooner than you might otherwise -- but even that's better than staying in limbo.

Gather Believers, Even if they Don't Give to the Cause

What if you chum the water, bait the hook, follow-up in a persistent, but polite manner; and it still results in a "no"? Well, I'd suggest you are after two things when talking to a VC: 1) believe and 2) invest. A "no" on investment doesn't foreclose the potential of gaining a believer in you, your product, or your market. Try to find out what area of your opportunity a VC does believe in, and what areas are a problem. Then, add that VC to an ongoing distribution list for future updates. This is another tactic that less than 1% of entrepreneurs utilize. If you get me on a distribution list of updates, you have the opportunity to grow my belief over time and address problem areas so I'll re-engage. For example, if a key missing piece was customer adoption, an email that mentions landing a big customer might cause a VC to reply for an update. Even if it doesn't pull a VC back to you, you never know when VCs are networking and your company is mentioned. If multiple VCs are aware of your latest company wins, there's a higher likelihood they will compare notes on your opportunity. Likewise, a VC familiar with your progress might point customers, partners or talent your way.

I've seen plenty of other tips for approaching and attracting VCs, particularly as it relates to qualifying the right VCs. These tips are not a replacement for those; just communication tactics once you've decided who to approach. I hope they help...

UPDATE: In the comments, Sam highlighted another great resource on pitching VCs, put together by Mark over at GRP. I think it's so useful, I wanted to highlight here -- and throw some linklove to yet another VC who understands the power of in-stream advertising.