10 Tips for Landing Venture Capital at the Seed Stage
Seventy-five percent of venture capital dollars are funneled into three markets
Even though Colorado has a vibrant economy for startups, one component of starting a business remains elusive in the middle of the country: raising venture capital.
Anna Mason, partner at Rise of The Rest seed fund, said that 75% of venture capital dollars are funneled into just three markets (Silicon Valley, New York City and Boston) during a panel at this year’s Denver Startup Week.
Here are Mason’s top ten tips for increasing your shot at securing venture capital investments in Colorado.
Fundraising is marketing
Before you even approach venture capital firms, you must establish certain components of your business. To start, build your funnel, research and know your customer, close the loop and nurture your relationships.
Be careful what you wish for
You enter into a business marriage the day you accept venture capital (VC) dollars. Before accepting any funds, you need to do your research on the VCs because they will hold you accountable.
Perfect your pitch deck
Your 10 to 15 slide investment deck should be short, simple and sexy. The deck needs to stand on its own and should focus on team, product, market size and traction.
Create a narrative
A startup is only as valuable as the sum of its people (and their stories. VCs like when you can link personal experiences to market opportunity.
Competition is good
No competition means a limited or non-existent market. Do your research before suggesting no competition exists and when you find it, differentiate yourself.
Represent your city
Focus on the strategic advantages of your city – not every successful startup was born in Silicon Valley. Lean into why your city is the right location to build your business when pitching to venture capitalists.
Timing is everything
VC is a supply-constrained industry. FOMO (the fear of missing out) can create a VC rush, so approach the market only when you are ready. And when the time is right, know how much you require and what you are going to do with investment dollars.
Be ready to scale – fast
VC demands significant and rapid scaling to realize returns so you need to be able to hit the ground running when you land that first seed round check. But remember, this is a business marriage so leverage investors’ experiences and networks and you will go far.
Don’t use bespoke investment terms
Think twice before accepting terms from an investor that demands terms deviating substantially from standard. Experienced securities counsel will help you understand and negotiate these terms to protect your company and your equity in it.
Decoding VC responses
No means no – and probably means never. Thank the VC for their time, ask why they aren’t interested and move on.
Not now – this generally means the VC is interested, but you are missing something or seeking investments too early. Ask the VC what they would like to see before investing and follow up when you hit that milestone.
Yes means yes…usually. When you receive a “yes, but” – it usually means they aren’t ready to lead. Keep the VC up to date on your progress and follow up when you find a lead investor.
Casey Kidwell is an associate at Husch Blackwell LLP's Omaha office.