How do you recognize, target, and then successfully attract the right VC firm for your venture capital funding? Finding the right venture capital firm offers a unique set of challenges that many founders may have not yet faced.
Early-stage businesses will often raise thousands of dollars from angel investors, partners, and private individuals. However, VCs are often ready to invest millions of dollars into businesses they believe in.
When searching for the right venture capitalist to team up with, businesses ultimately need to think about the entire package the firm brings to the table…. Not just the amount of money offered, but their core competencies, values, connections, and expertise as well.
Let’s take a closer look at where to look for potential VCs, how to identify a good fit for your business, and what to consider when determining who to target.
Name and Reputation of the Firm
Venture Capitalists have different reputations, which are based on experience, expertise, and past performance. The name and reputation of a VC often reflects on young companies and influences future financing rounds. High-reputation affiliates usually create “signaling” and substantive value to your business.
The Stage of Your Company
Different VCs finance different development phases of young companies. Depending on whether your venture is in the seed, start-up, scaling, or expansion phase, you have to find the right investors who are typically financing companies of your maturity.
Industry Sector of Your Company vs. Specialization of VC Firm
Venture Capitalists sometimes have a specialization on a certain industry sector. You should mainly search for VCs which are focusing on your company’s sector to increase the chances that you will receive funding.
Required Financing Volume
Different VCs invest different amounts. You have to determine for yourself what amount you are seeking for a VC who is willing to pay the amount you demand.
Location of the VC Firm
Finally, you should place a higher value on those VCs that are geographically close to your company’s offices. The rule of thumb is that a company should be reached within two hours.