We were recently invited to meet with a Venture Capital firm in London that wanted to boost its portfolio of early stage European technology startups.
One of the first things we do when responding to a brief is to put ourselves in the minds of that customer’s target audience, to understand more fully the challenges and issues they face, any existing perceptions and biases, and to discover opportunities to engage.
There is a huge amount written about what VCs look for in startups and how entrepreneurs should present their businesses and ideas in order to obtain funding, but very little on the other side of this relationship: how entrepreneurs view VCs and what they are looking for from them.
So we tapped into our network and spoke to three UK-based technology entrepreneurs who’ve previously raised funds from VCs to discover what they think about VCs and what they want from them. We’ve removed their names for the purpose of anonymity, but the comments are very real.
Yes, it comes down to money, but it is much more than that. Entrepreneurs want clarity from VCs, they want partners that understand them, who won’t waste their time and will give them the best possible chance of achieving their dreams.
10 things tech entrepreneurs said about Venture Capital firms:
- “Usually you just want the money. Some VCs will say they can add more value than others – be it through contacts, expertise, in-house support – but really you should be able to do those yourself.”
- “I want to know what makes that particular VC different or better than the others. Who is the portfolio manager? What is the team like? What is their experience? What do their exits look like? What is their risk appetite? Do they have any Unicorns in their portfolio? When did they start with them?”
- “Startups aren’t sure where they sit with VCs. They’ve all got different criteria and there can be an awful lot of time wasted. If you are pre-revenue, you don’t want to waste time going into meeting with people who only want to invest in businesses once they’ve hit cash flow break even.”
- “It is pretty difficult to find the right one, a bit haphazard actually. There are a variety of organisations who say they can connect you to VCs, I find them a bit parasitic.”
- “It is an interesting landscape. There are hundreds of VCs out there and it is hard to know where to start. There seems to be a lot of interest when you’ve got money coming in, much less so at the early stages. We worked with a big four accountant which had relationships with lots of VCs and knew what they are looking for.”
- “It is preferable if the VC you talk to at Series A stage is willing to commit to the journey and has the firepower to take you to your ultimate goal. If they’ve got other relevant companies in their portfolio then that is useful.”
- “Contacts and capability is all good stuff but what you really want is flexibility and someone willing to establish a genuine partnership with you. Can they follow you on your business journey? Series A is all good and well, but can they help you when you need Series B and Series C funding? Do they partners that might?”
- “The best investors are people who know what they are talking about and have entrepreneurial experience themselves. You forecasts will always be wrong and your customers will always be late. You need people willing to support you in good times and in bad.”
- “You don’t want to work with nasty people. The worst tend to be MBA-type fund managers that handle other people’s money. They aren’t prepared to take risks themselves, they just want the upside and they can often be nasty.”
- “There is no shortage of money out there, so to some extent you can choose who you want to work with. You want educated, intelligent money, people who understand your market, understand your business model and have contacts that can help you too.”