Use this “VC map” the next time you want to raise venture capitalGrowth & Scaling
For many founders, raising venture capital can feel like a full-time job. It’s a stressful, anxiety-inducing experience where this startup idea they’ve nurtured will be analyzed and scrutinized by investors who have no personal connection to it.
Then there’s that group of founders who view fundraising as a competitive sport. Rather than stressing over the minutiae of a pitch or replaying the events of a previous meeting, they view the entire exercise as a numbers game. They book back-to-back meetings and confidently pitch themselves to anyone willing to hear about their business. The entire process is thrilling rather than nerve-wracking.
Even if you want to be this super fundraiser, how do you go about securing introductions? How do you even get to the point where you can fill your calendar up with VC meetings and increase your odds of being funded?
Meeting early-stage funders
While there are success stories of cold emails to VCs turning into multi-million-dollar seed rounds, contacting firms out of the blue is an inefficient way to get funded. Instead, relationships grease the wheels for eventual meetings.
Plus, relationships usually help companies attract “smart money” – the kind of money that comes with expertise and guidance – as opposed to “inexperienced money” which simply follows existing investment trends and offers little guidance.
Warm introductions are critical. They lead to more meaningful discussions that cold introductions don’t foster. In some cases, investors are restricted from pursuing unsolicited pitches.
If you’re a founder without existing VC connections, this puts you in a tight spot: How do you go about securing these warm introductions?
First, understand that building VC relationships from scratch is possible, but that it won’t happen overnight. As business advisor and author Diane Helbig put it, “Networking is an investment in your business. It takes time and when done correctly can yield great results for years to come.”
How to properly network
The trouble is that most people don’t know how to properly network, or they don’t network with intention. In the popular imagination, people line up a few coffee meetings, shake a few hands, and 30 seconds of a movie montage later, they’ve got the funding they need. In reality, networking is about building human relationships – and building human relationships takes time, transparency, and sincerity.
The difference between genuine networking and transactional networking
One of the first things to understand is the difference between genuine networking and what experts call “transactional networking”. Genuine networking is building up meaningful relationships over a long period of time. Transactional networking is about meeting someone with the sole intention of asking for something.
There’s nothing wrong with being transactional in and of itself, but you should be upfront about your intentions. While this can lead to a “no”, seeds of trust are planted. This person knows what they can expect from you and that you’re not a time waster, because you’ve demonstrated your ability to be transparent.
If you don’t have a network developed, you need to have the patience to build one. While introducing yourself to people at networking events or meeting for a follow-up coffee, it’s important to find things that you have in common either by asking questions or doing your research beforehand.
Positioning yourself strategically
Furthermore, be mindful of how you position yourself when introducing yourself to people. Just because you aren’t being transactional, doesn’t mean you shouldn’t view networking as a branding opportunity.
If you’re creating a revolutionary global payments platform, you want to quickly communicate in a memorable way why the problem you’re solving is important. This cements “what you’re all about” in the minds of the people you meet so that the next time the topic of international payments comes up, they can reference you.
When building a network, you should also look for ways to be helpful. You don’t have to be a VC with money to invest to be useful to people in your network. You may be able to offer insights into a market someone is trying to break into, suggest a vendor or solution for a problem they have, or recommend a great developer which cuts their hiring time for a certain project in half.
Providing assistance without asking for anything in return helps build a relationship and also provides the foundation for future reciprocity.
Don’t forget to do something with your network
A common mistake people make is forgetting to actually do something with their network. Networking is not a race to have the greatest number of LinkedIn connections or phone numbers. It’s about creating shared value either through exchanging information, providing recommendations, or making further introductions.
Consider computer networks. An office full of wired computers wouldn’t be valuable if those computers couldn’t exchange information (e.g. send emails) or share resources (e.g. storage space and printers). Similarly, your list of contacts isn’t very valuable if you don’t make it a thriving, active network.
Once you understand this, you can use your existing connections to expand your network through a tactic known as lead mining.
How to lead mine your way to VC connections
Create a map of your network
A network map provides an overview of your connections, where they’re concentrated, and who can provide links to valuable second- and third-degree connections. It also gives you an understanding of which important clusters are underrepresented and warrant extra attention.
Identify the “super connectors” in your network
Your super connectors are the contacts who have the relationships to introduce you to the right people. They are the individuals you should focus your attention on and with whom you should try to secure a meeting. Avoid the temptation to immediately ask for a favour. As entrepreneur and bestselling author Keith Ferrazzi put it, “The currency of real networking is not greed but generosity." Instead of making an ask, identify what your contact’s current problems are and where you can provide a solution.
Make your ask – tactfully
Eventually, it’ll make sense to bring up what you need. Mention what you’re trying to accomplish and who you need to meet to reach your goals. This requires tact, since you don’t want your new connection to feel like they’ve been duped into a transactional “you scratch my back, I’ll scratch yours” relationship.
Repeat the process
“Making your ask” will pay off with some people and turn uncomfortable with others. Some contacts may resist your ask or reveal that they aren’t the “super connector” you initially thought they were. Take the hit, preserve the relationship, and remember that you’re lead mining. There’s no guarantee that all of your efforts will hit paydirt. It’s a numbers game, which means persistence is key. Rinse and repeat. If you’ve identified your parameters well, you’ll eventually hit gold with the right introduction.
Continuously grow your network
Lead mining activities shouldn’t put an end to your networking activities. Continue networking, but be sincere and deliberate about how you do so. Networking is not about rapidly adding new connections. It’s about building meaningful, mutually beneficial relationships with others.
- Understand the difference between networking that builds long-term, meaningful relationships and “transactional networking”
- Do something with your network by regularly engaging, sharing information, recommending resources, and making introductions so that you build a feeling of reciprocity
- Use lead mining techniques to turn your network into potential VC introductions
Interested in learning more about how to raise money for your Prairie-based startup? Download our free Ebook “The Harvest Guide to Funding” to learn more.