You need to understand that partners at a VC firm are normal people like you and me. They are not superheroes, or aliens or above average people. They are just people which job is to allocate money into companies.
Let’s not mystify the profession of VC as if it was some kind of guru or magician that knew the future. They don’t. They are trying to guess as much as you and me, with the difference of the experience of having to do it every day and with better information. Apart from that they are still a regular Joe & Jane Doe.
This said, how would you approach these people? So here it’s where we need to understand the game we are playing. There are a limited small amount of VCs firms and their are innumerable amount of startups (and being created every day). This creates an allocation problem. Due that there are 1000x amounts of startups in relation to VCs, they have to decide to invest in just a few of them. They don’t have unlimited money (even if sometimes it seems so).
The fact that the money is concentrated in few hands makes the leverage of the game in their favor. A note on this: the relation of the leverage between money and good startups is cyclic. Essentially it is on the people that have the money, but that power is reduce in economic (and technological) cycles. I would say that 2002–2004 the strength was in the money side. On 2004–2008 it was on the startups. Again in 2009–2013 is was on the investment side. Today I wouldn't choose a side. I have seen both.
This said, because the leverage is on the investor’s side, you need to “distinguish” yourself from the rest of hundred of startups that are trying to get their attention. So to decide who to approach is here where there are two main strategies: the shotgun and the sniper.
Both strategies have the same goal, but they are motivated for different principles or reasons.
In the shotgun you are looking for money and you don't really care who will give it to you. So you just walk up and down of Sand Hill road knocking in every door you can. You focus on the game of numbers and figure out that if you visit 60 VC firms you probably will get one to back you up. This is right on a mathematician-statistic way of looking at it but it’s wrong because you think you are optimizing for time but it actually work the opposite way.
With only one pitch I don't need to learn what to say to each VC, I just repeat until I get one.
The common idea is that if you give the same pitch 60 times eventually one will like the idea and want to back you. The problem is that you are consider your audience as homogeneous. Even if there job is the same, as you and me, each VC is a unique person with specific motivations.
This is not an audience of 60 where the pitch is one, but an audience of one where there are 60 pitches.
This bring us to the second strategy of “sniper”. I like to actually go one step forward and think this is a battle between “snipers”. If you haven't seen the movie “Enemy at the Gates”, I recommend.
Let’s give a couple of examples:
Imagine you are a SaaS enterprise software that manages all the contracts, communications, logistics and suppliers of construction companies. You are on the cloud and you have a recurring revenue model.
Who would you approach to? Who would be the best candidate for your startup? I can't think of someone better than Jason M. Limkin. He founded the largest SaaS conference in the world (Saastr). We works as Managing Director at Storm Ventures but he was also CEO of Echosign (Adobe). You are looking for someone that knows about your SaaS software business? Someone from who you can learn and that has experience building?
Let’s say now that you have a marketplace. You and your friends have build a marketplace neighborhood organic produce vegetables where people sell to each other the extra fruits and vegetables they have, based on their location.
Who would you approach to? Who would be the best candidate for your startup? In this case I'm going to split it into two firms: if you are in the west coast I would go with Norwest Venture Partners ( Sergio Monsalve) who was has a huge experience on marketplaces (eBay, Udemy, Lending Club). If you are in the east coast I would go with Fred Wilson from Union Square Ventures (Etsy, Kickstarter).
Adapt the pitch to the each investor. Read what they have written, search what companies did they worked before and in which they sit as a board advisor. What is it that excites them? What are they usually looking for?
I would even go further on and would contact those startups who already got funding by them. Ask the right questions and understand what was it that caught their attention. Remember that we are all normal people and we are all run by our emotions. Find that something that will make them get hook to your idea and startup. If you get it, you will be accepting money instead of asking for it.
Send me an email to jdcarluccio [at] gmail.com to see if I can help you with an intro or referral. Also get in contact on Twitter (@JDcarlu) for a faster response.
PS: this does not focus on the usual “How to approach investors” blog from which there is a lot of things to read on the Internet.
PS: Hope you find this post interesting. It would mean a lot to me if you Recommend it. Also tell me on Twitter, I'm @JDcarlu
