How to Find the Right VC For Your Startup How to Find the Right VC For Your Startup
It's no surprise that startups face a number of challenges in building toward sustainable growth -- from innovating a product or service to hiring the right team, to going to market, each step of the startup journey presents its own unique obstacles. Venture capital fundraising is one of the primary methods startups use to finance growth.
Key Takeaways:
- VC funding isn't one-size-fits-all for startups -- it might not always be right for every business.
- Startups that are offering products or services in larger markets are often the most attractive for VCs because they have the most potential to generate worthwhile return.
- Find venture capital investors who have a history of working with startups in your industry or field.
- Determine whether the stage that your company is currently at aligns with a VC firm’s investment criteria
- Look into any geographic restrictions VC funds have before reaching out to them to set a meeting.
Securing meetings with potential investors is often the primary focus for startups, but it's equally important for founders to make sure they are targeting the right kind of VC firm to do business with. Doing this type of research to ensure you are targeting a VC partner who aligns with your business goals can make securing funding easier and will ultimately help your business more in the long run. Below, we'll explore ways to determine whether venture capital is the right type of funding to pursue for your startup, how to determine what type of VC fund is right for your business, and more.
Is Venture Capital Right for Your Startup?
Venture capital funding has exploded in recent decades and is now viewed as a primary source of funding for startups. VC investors can provide an invaluable service to many startups, but it's important to remember that VC funding isn't one-size-fits-all for startups -- it might not always be right for every business.
What types of businesses should be looking for funding from VCs? Generally, startups that are offering products or services in larger markets may be a better fit for working with venture capital firms because they have the potential to generate worthwhile returns for investors. VC funds are comprised of limited partners (LPs) who are almost always investing in a range of different businesses and markets. These investors only see return on their investment when a startup goes public or is sold. It's no secret that there are few startups that are successful enough to eventually go public, so the potential return on investment to attract a VC investor must be significant. If your business doesn't have the potential to deliver big returns for investors, venture capital might not be the right fit for your business.
What Type of VC Investor is the Right Fit for My Business?
If you've decided that pursuing venture capital funding is the right path forward for your business, there are several steps to take before you start working on your pitch deck to make sure you're setting yourself up for success once you start reaching out to VCs. First, you should do some basic research to find venture capital investors who have a history of working with startups in your industry or field. These investors will have a greater understanding of the potential for your business and, regardless of whether they end up investing or not, might be able to offer you valuable feedback about how to improve your pitch. Finding the right investor will also help you maximize the investment you receive and can help you network with experts in your field who can offer advice on how to scale your business.
Once you've compiled a list of VC firms with a history of investing in your industry try checking their websites to determine whether the stage that your company is currently at aligns with their investment criteria -- this will help save you and them valuable time. For instance, if you're an early-stage business in search of start-up funding you may want to exclude any VCs who specialize in the growth stage, expansion funding, or bridge state funding from your outreach efforts (but save their contact information for down the road when your business grows).
In choosing the right VCs to reach out, you'll want to make sure you do your due diligence on any geographic restrictions on where they make their investments. Some firms will only invest in businesses based in specific locations, while some investors are more open to working with startups that aren't based locally. Many VC firms put this information on their websites and, again, you'll save potential investors and yourself valuable time by looking into this before reaching out to them to set up a meeting.
Setting a Meeting: How to Find the Right VC to Invest in Your Business
Once you've done your research and have reached out to venture capitalists who you think might be a good fit to invest in your business, you may be lucky enough to hear back from one or two who are interested in setting up a meeting with you. You'll likely be excited to speak about your idea or product (and rightfully so) but try to understand what your potential investor wants to get out of the meeting as well and be prepared to use the meeting as an opportunity to further assess whether they are a good fit for your business. VCs have a wide range of expertise so if this is your first startup, look for a reliable partner who will guide you through your growth, make introductions, and be fully invested in your company (this includes future rounds). Be ready to talk not only about your product or area of business, but also about your expertise in the field, why you're passionate about your innovation, who your potential customers are, and your short- and long-term goals. Also be ready to go into the nitty gritty (as much as possible) on the business side on topics including capital needs, market opportunity, cost per acquisition, and more.
If all goes well with your meeting with a VC, you'll walk out with a sense of whether the investor you've met with is the right fit for your startup.
Still have questions about how to find the perfect VC for your startup? Leader Bank's Venture Capital and Private Equity Banking team is here to help with an invaluable knowledge base, personalized relationship banking services, and flexible solutions for both emerging and established funds.
