A number of people might disagree with me, but I advise startups that when they start the process of looking for VC (or Angel) money to focus on those that are specifically interested in their space. If you don’t you are wasting your time as they are going to say “No.” Don’t take it personally, they just aren’t into you and the space.
Well, let me correct that. They aren’t interested in the space that you are going into.
Each Investor has an area of interest. Some may be focused on the Consumer space, others on Mobile, or event Enterprise startups. Still others might be interested GreenTech, BioTech, Manufacturing or Retail. They might only be interested in enterprise startups targeting the BioTech space in Cleveland. Your job is to know what they are after. If you aren’t their type, don’t waste your time.
There are many other criteria to consider as well:
Vertical (covered above)
Location
First and foremost focus on the VCs that are in your area. If for some reason you aren’t gaining any traction then start looking outside of your region. For earlier stage companies the odds do go down the farther you get to where you are located, though sometimes you have to do it. Many VCs also won’t invest in companies where they don’t have some type of representation.
Amount
How much do you need? I won’t get into the debate about how much to take; what you need vs what you can get (if higher). This discussion is specific to determine how much you need and then identifying which firm matches that need. Whether individually or as part of a larger deal with other firms.
Say you find a firm that is interested, but can’t invest the amount you need. This is an opportunity to see if they might be willing to co-invest with another group that is outside the area. Something to keep in mind.
Terms
The fun part. How much do they want versus how much you are willing to give. Remember, a small part of something is better than a big part of nothing. With the market the way it is, valuations are coming down.
However, fight for everything you can!
Company Stage
Most VC firms focus on one state or another. Where does your fall within that spectrum? Is it early, mid, late, scale, IPO? Be sure to target those VCs that are interested in the stage that your company is in.
If you don’t do your homework, be prepared for a big fat “No.” Nothing personal of course, it is just the way it is. Investors focus on the areas where they can have the most positive impact. Similar to what you are doing with your startup.
I would start by identifying all the VC (and other investors) in your area and taking a look at their portfolio page to see what types of companies they invest in. If they don’t match your criteria, then you know what to expect.
