The first phase of this process is understanding which VCs are a good fit for your company’s goals. The second phase is securing the meeting. This post will give you the tools to accomplish both of these tasks.
Phase I: Create a target list of VCs that are a good fit for your company.
All venture capital firms have a specific focus regarding the kinds of companies they fund: They might invest mainly in software, consumer products, fintech, green technologies, AI or any other number of categories. And each firm focuses on different stages of investment (seed, early-stage, series A, series B and series C). Thus, the first step in reaching out to VCs is research. Here’s how to start.
1. Find venture capital firms that invest in companies like yours.
Create a roster of VCs that are likely to be interested in the kind of deal you’re offering, both in terms of industry and product. Look for firms that have a track record of investing in your industry and have funded companies similar to yours in terms of revenue growth and product focus.
While there are some VC firms that invest in startups in different regions, by and large startups tend to attract investment from local investors. The below resources can serve as a first port of call for entrepreneurs looking to get a picture of the local scene:
- Australia: Fund Comb or the Australian Government website
- New Zealand: Kindrik
- Singapore: TechInAsia
- Philippines: Aurigin
- India: Inventiva
- Hong Kong: Growth Hackers
Additionally, check out the CB Insights data-driven top 100 ranking to familiarise yourself with the heavy hitters of the VC world.
2. Ensure the firm invests in the stage of funding that you seek.
Which stage of financing are you in? Before adding a VC firm to your target list, be sure it’s actively pursuing deals in your stage.
Most venture capital firms share their investment ethos or criteria on their company website. For example:
- The investment criteria for Aussie EnergyLab’s Accelerator program identifies a focus on first institutional investments for clean-energy startups. If you have an early-stage company developing a clean energy product, Energy Lab could be the right investment partner, and you should add it to your target list. If not, you should leave it off.
- Jungle Ventures in Singapore invests their time and money on technology businesses with unique ideas that meet the needs of consumers SMEs in Asia. If you have an early-stage company developing a unique tech product, Jungle Ventures could be the right investment partner, and you should add it to your target list. If not, you should leave it off.
- In India, the investment criteria for Venture East identifies a focus on rapidly growing businesses in Technology, Life Sciences and emerging sectors. If you have an early-stage startup developing a unique, tech or life science product, Venture East could be the right investment partner, and you should add it to your target list. If not, you should leave it off.
- Nest in Hong Kong value sustainability and innovation led institutions. If you have an early-stage company developing a sustainable and innovative product, Nest could be the right investment partner, and you should add it to your target list. If not, you should leave it off.
3. Check out the firm’s past deals.
Another way to determine if your company fits within a VC’s investment ethos is to review the firm’s recent deals, which you can usually find online.
Even top-ranked venture capital firms like Australia’s Blackbird Ventures openly list their past deals — showcasing the quality of their portfolio helps them attract more top founders. Reviewing them will help you determine if your company fits the firm’s prototype. VCs will also announce when they raise a new fund, or pool of money from investors, to essentially announce to founders that they are looking for companies to invest in.
Sequoia Capital India prefers to focus on moonshot opportunities, announcing they want to invest in ”those few founders who are resolutely committed to building enduring companies with unshakable foundations” that will shape the future of their region
Hong Kong’s Click Ventures has a more specific mandate — they are looking for technology companies whose platforms creates network effects to attract and keep users, while building a deep moat around the company (typically intellectual property) that makes it hard for competitors to replicate.
VC firms are transparent about the types of investments they make, so do your research upfront to find out if your company is a fit. You can also work backward: Locate a business similar to yours that has gotten funded and find out which firm invested.
4. Consider Venture Capital company’s location.
Some firms only invest locally, while others are open to investing beyond their city and country. If you’re based in Australia and one of your target venture capital firms is based in Asia, be sure it makes global investments before sending an email.
It’s worth noting that some regions receive more VC funding than others. Within Australia, startup investment saw a marked increase in 2020, despite pandemic woes, whereas VC investment in Asia remained steady.
If you’re operating a company in a regional location, it might hinder your ability to capture capital investment. However, if an investor is actively monitoring the business, a regional location might not be an issue.
Generally, it will be easiest to get attention from a local firm — particularly for early stage companies. However, if your business is truly attractive to VCs, location will not be a hindrance. Melbourne-based Culture AMP raised funds from a variety of VC partners in and outside Australia including Sequoia Capital China in Beijing, Global Founders Capital from Germany and Australia’s Hostplus. The firms likely chose to invest because one was already a customer (Sequoia Capital) and because there was demand in those markets for startups that could help enterprises improve employee culture.
5. Organise your Venture Capital Investors list.
While a targeted list is important, it may also help having a wider pool of potential investors, in case you’re unsuccessful in the first rounds of pitching — venture capitalist Joshua Henderson recommends including 20-30 investors and/or firms on your target list.
Phase II: Reach out to your target VCs.
Once you’ve got a target list, it’s time to set up meetings. You have two opportunities to make connections: an intro from someone in your network or a cold email to a VC partner.
The “warm intro”
An introduction to a firm via a mutual connection from your business or personal network is called a warm intro. This is the best-case scenario, as VCs are more open to deals that come from a trusted source.
To find warm intros for your target list, ask yourself:
- Do you or your company’s team members have any direct contacts at VCs?
- Are there people in your extended network (i.e. parents, mentors, past employers, friends, professors) who have VC relationships?
- Does your company have board members with VC connections?
- Can you utilise LinkedIn or business networking groups to connect with VCs in your area?
- Have you worked with a business incubator or angel investors that can help open up the next phase of introductions?
The “cold email”
You may not have mutual connections to some VCs on your target list. In that case, it’s time to start cold emailing your targets.
This is the more difficult way to get a meeting, but it’s not impossible. Arlan Hamilton, founder of Backstage Capital, has invested in more than 100 startup founders. She reveals her best advice for a cold email is to “make it personal, but get to the point.”
Create a template.
A general template will be a helpful starting point for your cold email outreach. Put together the critical information about your business and current progress, and state why you’re contacting firms. This email has to grab a VC’s attention, so include any impressive revenue stats, major clients or other eye-catching facts.
Personalise emails to individual partners at each firm.
Broad information about your company can be pulled from the template, but the majority of each email must be personalised for a select partner at each firm. Partners within firms often have a sector focus. For example, a tech VC firm like Skip Capital might have a partner who specifically funds and is considered the firm’s expert on deals with software companies like Safety Culture, which develops software for mobile workplace safety and quality management.
Research the partner and get a solid understanding of why they’re the person most likely to be interested in your project. In your email, mention the partner’s industry interests or other deals they’ve done that relate to your business.
Be direct and concise.
Get to the point quickly. Everything from your email subject line to the layout of the text should be clear, concisely explaining why your company is relevant to the particular VC.
The big pitch
A meeting with a VC is your chance to pitch your big idea and ask for investment. The pitch will include information about your company and detail the product or service you’re developing. You’ll need to create a pitch deck for this. To learn more, check out The Perfect Pitch Deck and Presentation Style to Secure VC Funding.
The bottom line
Getting connected to the right VC to fund your business takes a thoughtful and targeted approach, which always begins with research. Once you’ve nailed a meeting, though, it’ll be well worth it.