When do you start searching for VC's?
I was reading this article on traction and it had an interesting comment in it:
If you wait until you're "ready" to fund you're too late. Funding is about developing a relationship over time. Most of us wouldn't get married on the first weekend we met someone in Vegas. And most VC's wouldn't fund the first time we meet you. Given that many VC's base their decision on the team, the longer they have to get to know you the better.So here's the situation I'm in right now. Our startup is about 8 weeks old at this point. We are in the middle of building our proof of concept. Our business plan is basically complete, as is the pitch deck. We expect to have our first iteration of our product ready for "demo" purposes probably in another 4 - 5 weeks or so. It will probably take another 4 - 5 weeks after that to get an MVP put together that we can actually put out there.
While my business partner is building the app, I have been documenting requirements, attending local startup events, meeting people, working on the business plan, validating assumptions, refining the pitch deck, and working on our website and social networking accounts, as well as drafting some (unpublished) blog posts. We haven't incorporated just yet; I've been receiving mixed advice... cost is definitely an issue for us, we have put in a combined probably $1500 but I have read that a "real" startup lawyer is > $5k and I just don't have that available right now.
We are in the process of a business plan competition and were selected as semifinalists; if we win that we could potentially walk away with $25 - $50k, which would be enormously helpful in purchasing some required software licenses we need, as well as forming the actual corporation.
But when is the right time in all this to get the gears going? I want to now, but I'm paranoid because while we have a significant portion of the backend work the only thing I have to actually "demo" is some Balsamiq mockups I have been doing of our anticipated UI designs. The quote above makes it sound like I should just get out there and actually try to schedule some appointments with VC's that really have no purpose other than to just introduce myself and our business model at the highest level. Without any "closing" for $$.
The other question is; how do we actually find these people? I've been getting active on twitter and am going to begin attending local events (thank god I live in Massachusetts which has a pretty thriving startup economy, it's not Palo Alto but hey!) - like Ramencamp and some other networking events. Should I be cold calling lawyers? Should I be cold calling VC's?
I could also just start reaching out to other funded companies and talk to their owners, but I don't want to be intrusive either. And how do I figure out what VC's I even want to target? Is it based solely on their investment portfolio? (market size, stage of growth, and industry or target area?).
Thanks in advance - I just want to keep myself focused on the most important things so I don't waste time on making T-shirts. I have a vision in my head of us hitting our MVP and then just sitting around while I putter to investors for three months. Nows as good a time as any for me to be actively pursuing... that way when the product is ready for beta I can get out there selling!! (catch-22: isn't the selling supposed to come first?)
Thanks all for any tips / advice you have on this!
EDIT: I'm still interested in some more feedback. I can't figure out how to add bounties yet :) (Still waiting! Bump!)
Networking Funding Venture Capital Seed Funding
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Going to meetups is ok, but I would focus more on figuring out marketing channels, SEO in particular if it is the kind of a product which will benefit from people discovering it. – Genadinik 13 years ago
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It's a mobile app, so the SEO requirements are different. Getting the name out there will be important, I still have to learn about marketing on the app store / android market. – Nick 13 years ago
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yes this is true. You have to learn the kung fu of and black magic required to have the app rank in the app store. Also, study the bejuzuz of your competitors to see what they are doing well (copy that) and where they are not good (think of features to do it better eventually). – Genadinik 13 years ago
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Also, remember that there are verrrrry few companies who can get by on just having a mobile app without a site or other marketing properties which will drive them to search for the app and download it. – Genadinik 13 years ago
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we do have a complementary website :) – Nick 13 years ago
2 Answers
Sounds like it is a really long time before you should focus on VCs. At this time it will be more of a distraction. You are better off thinking ahead how to self-fund your initial runway.
You usually find them via connections, which is the second best case, or if they contact you because you are doing great without them, which is the best case.
You can look for them anywhere really..Twitter, algellist.com, etc. But at this time it does not seem like they will be very responsive.
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So I read about certain businesses getting funded prior to sales, when the have a proof of concept or MVP ready, even if that's several weeks away, you think it's too early? I'm concerned about the time that "relationship building" takes... I don't want funding to be the detractor eventually from growing the business. And the model definitely requires funding since critical mass is important and requires marketing and sales $$ – Nick 13 years ago
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@Nick The businesses which have funding at a very early stage tend to be run by trusted and known entrepreneurs. These are people who have done something amazing before, and have earned a reputation. Focusing on those cases is mis-leading as they are not representative of the majority's experiences. :( – Genadinik 13 years ago
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@Nick a few months ago I tried to raise money for comehike.com - the product had some maturity. It was making some money, growing in registered users and page views, and was an improving product on the market. The process of raising capital was very difficult even in that case. And ultimately I raised nothing. – Genadinik 13 years ago
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@Nick lots of marketing like SEO is free. Being creative with your marketing is free. Creating something awesome that people recommend does not have a marketing cost. Creating a social media presence is free. Being awesome and being mentioned in blogs and publications also does not have a marketing cost. – Genadinik 13 years ago
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Thanks for the comments, appreciate it! – Nick 13 years ago
When you have proof of traction and conversion. Investors will not finance an idea, not unless you're a well known former CEO/founder with an existing track record of financial success.
Get your site/app up, get traction, build impressive funnel diagrams showing the conversion percentages and go after VC's.
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Thanks Ron. So what about Angels? I know I mention VC but isn't there startup capital out there in other regards for more seed stage products? I do hope to have this in place with several users by mid-summer. – Nick 13 years ago
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Angels are less formal. If you can find someone, there is no law against showing him/her your idea or whatever you've achieved technically so far. If they like it-- great. There is no formalized process with Angels like there is with VC's. If they like you, they'll support you. Getting to meet one, present to one, and having one of them want to support you is no easy challenge. Angels don't grow on trees and most of us don't know one. – Ron M. 13 years ago
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Thanks Ron. I just found out my coworker used to work with a big Boston angel. Gonna see if I can get an introduction :) – Nick 13 years ago
