You wouldn’t (we hope) waste time selling a product to a person who clearly didn’t need or want it. The same goes for investors. You need to find not just any VC; you need to find VCs who have a reasonable chance of investing in your company. (That goes for angels too.)
So when researching prospective VCs, it’s important to answer some key questions:
- Is the VC interested in investing in the market or the technology that you are addressing?
- Does the VC do seed or early stage (series A) investments? (Not all do.)
- Have they made any investments that relate to your market?
- Have they made any investments in Oregon?
- Have they made any investments at all recently, or have they gone quiet?
- Research the partners at the firm. Which partners have background in and/or are interested in your space?
- If the VC looks like a good fit, try working your own network of contacts to find someone who can introduce you to one of the partners at the firm
- Look at the companies in the VC’s portfolio; do you have any contacts at any of the portfolio companies?
VCs these days have web sites that generally provide some insight as to what market segments they target and what actual investments they’ve made. You’re hit-rate will be higher if you focus on investors that have invested and want to invest in your space. So do the web research. In the case of angels, you’ll have to network to ask-around about people who are interested in your space.
Qualification continues when you get the first meeting. Ask questions.
- How large is their current fund?
- Is there still room in the fund for new investments, or is it largely committed? (Investors must allocate a significant part of their fund for the follow-on rounds that their portfolio companies require, so if their fund is mostly spent, the rest is probably already allocated to existing investments.)
- How does their process work for evaluating investments? (Understand what steps they go through, and how long it typically takes.)