We were recently invited to meet with a Venture Capital firm 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 considerable amount written about what VCs look for in startups and how entrepreneurs should present their businesses and ideas 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 anonymity.
Ten things tech entrepreneurs said about Venture Capital firms:
- “Usually, you just want money. Some VCs will say they can add more value than others through their contacts, expertise, in-house support. You should be able to do those yourself.”
- “I want to know what makes that VC different or better to the others. Who is the portfolio manager? Do they have any Unicorns in their portfolio? What is their appetite for risk? What do their exits look like?”
- “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 once a business has hit 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 is lots of interest when you’ve got money coming in, but much less so at the early stages. We worked with a big four accountant who 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 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 have partners that might?”
- “The best investors are people who know what they are talking about and have entrepreneurial experience themselves. Your 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 fund managers that handle other people’s money and aren’t prepared to take risks themselves. They want the upside only.”
- “There is no shortage of money out there, so to some extent, you can choose with whom you want to work. You want smart money, people who understand your market, understand your business model, and have contacts that can help you too.”