1 trick to get a VC
So there is a saying in the Valley that goes “if you ask for money, you will get advice and if you ask for advice you will get money.” Although this is not completely true there are some lessons to learn from this.
One of these lessons is a strategy I have helped entrepreneurs use before and that has worked (not every time and it’s risky, so be careful).
Let’s understand first the situation in which you need this strategy and why. My experience is exclusively with enterprise business (not consumer market, sorry).
You have been walking up and down Sand Hill road with no luck. You have cold emailed (and DMed) every Angel Investor and VC. Even if you had some meetings you still haven’t raised any money. The problem is that while you have some traction, and some customers, you are still burning money and the hour glass says you have 6–12 months ahead. No family or friends will give you the amount of money needed at this stage. The question is: what do I do?
Oh yeah! You tried this option and it still didn’t work.
The strategy is based on a win-win-win hustling situation that you need to pull off. Kind of the one Christian Bale did on American Hustle.
First you sign up for the Mattermark free trial ☺. This is a powerful tool that you will use for two main purposes: to find all your possible clients (starting by the ones geographically close as possible to you) and then you will find who are the VC/Angels that have backed these companies/startups.
Sounds easy but it’s not. You need to go deeply research those clients that will add real value. Think about those you would be aggressively selling to one year from now if you got $1.5M in the bank. Understand your value proposition to each of them and why they need you. How does their business become more profitable because of you? There needs to be an analysis on the metrics. Your startup should have at least one customer or user case that can demonstrate to the company that the value proposition is real. Also you need to have a person (a real one) that can vouch for you.
Got it? Great.
Now you need to find those VC/Angels that have backed these companies. Sounds easy too? Mattermark makes it easy I know. There is a trap here. You can’t get those VC/Angels that already have invested in companies that compete with you. Investors (in most cases) respect founders and try not to get involved with startups that compete with their portfolio companies. Don’t waste time. Narrow in and go deep. Find what investors fit your model and learn everything about them. I’m saying everything. Understand their motivations, strengths and weaknesses.
So now that you found the investors that fit with your company, that backed your future clients, and that don’t have a conflict of interest with your competitors, the game is on.
You will need now to find a way into the inbox of these investors (or the investor). Here is the tricky part because there is a referral-network-pay it forward BS in the Valley that makes it difficult to connect without contacts. Here are two great blog posts about how to do it: here and here (if you get this far and you can’t hustle your way in, email me at jdcarluccio [at] gmail and I will see if I can help you).
Imagine you find the investors email and have wrote the perfect cold-warm email. Let’s be clear: you are NOT asking for money but for introductions. If there is money mentioned in the email you are probably done. No pitch. No BS. Explain briefly what you want and why.
“My product does X that could help company Y to get a better XYZ and this will increase their sales XX% (or engagement, traction). We have demonstrated it in company QQ in XX months. Mr. Doe from company QQ can corroborate this information.”
Let me be crystal clear: this is like the columns of the Parthenon. Without this there is no structure and no way your hustle can stand a chance. If any of the information you are writing is not real or can’t be confirmed please don’t even try this.
Now that you have his attention you tell him that if the introduction results in paying customers and their numbers grow and you have metrics. You will come first to him. This is the part that most people don’t like.
Why if I have the metrics now, should I have to go to this investor? Because you still need to play the old game of pay-it-forward. This game works in different networks and once you enter his network by becoming a provider of services to his portfolio company, then you need to try to strength the relations.
This strategy costs $0 to VC/Angels and they might see your product as a way of helping their portfolio companies. If you succeed, they will be happy to invest knowing that you are becoming part of their ecosystem.
As @jason mentioned in his tweet, investors try to help their portfolio companies with the hiring process or connecting them with possible clients.
Remember that anything that increases the value of an investor’s portfolio will put money in his pocket.
If you get this hustle right the investor will call the CEO or head of sales of his portfolio company to introduce to you. Now you have to work your ass off to create huge value and start getting the $$ from them. One at a time. Work hard and then try the strategy again if you still need the money. Remember now you have an investor’s contact that can verify you are working hard and doing the things right. Give him a call.
So let’s summarize this:
1-Find the companies that will be your clients for the next 5 years.
2-Find those investors that backed this companies and can be interested in invest in you.
3-Ask for introductions not money. Provide value. Over-deliver .
4-Hustle. Hustle. Hustle
5-Call investor for money.
PS: Hope you find this post helpful. If you did please share it with other founders. Also tell me on Twitter how it went, I’m @JDcarlu