But I do not know a single investor.

Previous parts: First part , Second part .

In the previous article in this series, I told you what to do if you were denied investing.

However, this suggests that you were able to find the VC.
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What to do when you have a startup that you want to be invested, but you do not know a single VC?

Of course, I am familiar with this situation. When I was in college and working on Mosaic at the University of Illinois, the definition of “venture capital” meant to me as much as “klaatu barada nikto” (note of the translator: the sign phrase from the film “The Day the Earth Stopped ” 1951, This phrase should have stopped the robot Gort'a from destroying the earth). I have never met VC, and no VC ever talked to me, and I would never even recognize him if I ran into him nose to nose. If it were not for Jim Clark, I'm not sure that I would ever manage to get money to create a company like Netscape, for example, even if I could just start to create a company.

The starting point for getting investments in case you don’t know a single VC is that you should realize that VCs mostly work on recommendations. They hear about a promising start-up or founder from those with whom they had once worked, such as another founder, or a general director, or an engineer from another startup that they have already invested, or a business angel, with whom they had previously jointly invested in any project.

This is a simple mathematical formula; Each VC can finance only a small number of startups, and with the financing of one project, it has to meet with 15 or 20. There are more than a hundred projects that want to meet, and VC most likely simply does not have enough time to meet everyone. Therefore, VC has to rely on others to weed out hundreds to 15 or 20, so that he can spend time searching for what he needs among these 15 or 20.

Therefore, sending a business plan according to the principle “like snow on my head” to an investment company is tantamount to sending a script on the same principle to a Hollywood film company, i.e. completely pointless. Therefore, your main task should be getting into these 15 or 20 with which VC meet, relying on the environment, and not in those hundreds of people whom no one recommends, and with whom VC has no purpose to meet.

Put it all together

Create and develop your business plan, your presentation and related materials so that when you meet with VC, you stun it with your start-up startup, founded by someone who knows what it is, and you do.

I recommend that you read about what you need to do to create an effective business plan and presentation, and then assume that you have already been refused, go back to the previous article, go through all the points and correct your business plan before you go to meeting The only reason why VCs meet startups only on recommendations is that most of the hundreds of startups they could meet with would be unprepared and ignorant, and as a reason for this, they are not worth the investment when they are met. Therefore, in your hands there is an opportunity to break through the crowd by making a great first impression, and for this you need to think everything a few steps forward and do everything in advance to make your steps confident, and your business plan - a masterpiece.

The best option for you will be if you come to a meeting with a work product, or if you cannot create a work product without investment, then, in extreme cases, the beta version or prototype will come down in any form: a working, but not yet running web -site, program model with partial functionality, or anything else. And, of course, it will be even better if you have support in any form: users, beta testers, the choice of Internet users, or what is most suitable for your project.

With a work product that can be a reason for a startup that needs funding, your chances of getting an investment are much higher. Let's return to my practical method from the previous article: when in doubt, work on a product.

In case you didn’t work with the product, and in addition with users and customers, be sure that you need such a brilliant presentation, how much you can create it, which should be present: models, screenshots, market analysis, customer base research, such as interviews with potential clients and so on.

Do not write a detailed business plan. Most of the VC invests in projects based on the brilliant presentation of 20 slides, or do not invest at all. Corollary: VC, which requires a detailed business plan - this may not be the VC with which you need to work.

Explore, explore, explore

Do some serious research on VC and find those that specialize in the sector to which your startup belongs. Meeting with VC, specializing in investment in health care is completely illogical, if you have a consumer Internet startup, and vice versa. VC singles usually try to stick to one line of companies in which they invest, so you need to identify these VCs and cross out those that you do not need.

About creating contacts

The best way to make contact with VC, I think, is to work in an invested startup, be the best, get promoted and connect to the environment.

If you are not able to go to work in an invested startup, then go to work in a good technology company that employs a large number of people, such as Google or Apple, gain experience, and then go to work in an invested startup, be the best, get promoted and connect to the environment.

And if you can’t go to a good technology company, then go get a bachelor’s or master’s degree from a good research university, where technology companies usually hire to work. Then go to work in a good technology company that hires a large number of people, such as Google or Apple, gain experience, and then go to work in an invested startup, be the best, get promoted and connect to the environment.

It sounds like I'm kidding, but actually I'm very serious. This is the path chosen by many of the founders of invested startups that I know.

Several other ways that do not take so much time

If you are still in school, go immediately or plan a transition after graduation to a large research university with good connections to the VC world, such as Stanford or MIT.

Stanford graduates are “responsible” for the emergence of companies such as Sun, Cisco, Yahoo and Google, so it’s likely that it’s useless to say that VC from Silicon Valley is always “hopping” around looking for the next Jerry Yang or Larry Page.

As a contrast, at the University of Illinois, where I studied after graduation, mostly cows that mutated to live in a cold climate “run wild”.

Alternatively, contact Y Combinator. This program, founded by Paul Graham and his partners, finances projects at an early stage under a well-thought-out program in Silicon Valley and Boston, and then does everything possible so that they appear before VC for subsequent financing. This is a great idea and a chance for people who take part in it.

Read the VK blogs. Read them all, and read them very, very carefully. VK, which maintain blogs, provide the founders with a great service, providing very useful information and the ability to contact them by email, comments or even download podcasts. Each VC is different from the other possible ways of communicating with people on the network, but by all means try to contact with most of them.

First you will know which VCs, what types of companies are interested. At best, VC can enable its readers to communicate with it in any way, including e-mail applications for startups that correspond to its categories.

Fred Wilson from Union Square Ventures went further and enabled his readers to create and download more detailed plans about their start-ups, which they want to be funded so that he can listen to them on his iPod. I don’t know if he’s doing it now, but his blog is worth reading and finding out.

In addition, many VK are passionate fans of new ways to communicate, for example, Facebook or Twitter. According to observations, VC, which is looking for and using new ways of communication, will prefer to communicate with people using this new type of communication. Therefore, when something new from this area appears, go there and find out which VCs use this method and communicate with them in this way, of course, prudently.

Often, the idea of ​​a founder of a startup who is looking for investments, a blog about a startup, about interesting things happening about his thoughts, is very good. This idea takes the founder to the mainstream of communication, which can lead to contact with VC, and when VC decides to look at you and your company, he can read your blog and understand the essence of you and how you think. This is another way to make the right first impression.

And finally, if you are a programmer, then I support you and advise you, if you have some free time, create or contribute to a well-known open source project. The open source movement is a great chance for programmers around the world not only to create useful software that many people can use, but also to create a reputation for themselves, no matter what they do in their normal work. More effect than simple steps gives you the opportunity to send a letter to VK, which says: “I am the creator of the“ A ”open source program, which has 50,000 users all over the world, and I want to tell you about my new startup” .

If you use at least several of these methods, then eventually you will be able to communicate with some VCs in ways that are convenient for them, and this can lead, in consequence, to communication on the topic of financing, or even acquaintance with other VCs.

I personally hope that the next Google will be funded due to the fact that the founder read the blog of this VC and sent him an email as a first step. Then all the VC will immediately start blogging.

If nothing helped

Alternatively, in descending order for you can be, it seems to me: business angels, service contracts or early users, working in regular jobs and working as a start-up in your free time and life on a credit card.

Business angels are individuals who invest in companies in the early stages of development, they usually appear before the VC. Business angel financing can be a good starting point because good angels usually know good VCs, and they will only be happy to present you to investors so that the company will continue its successful existence, which will be good for them and for you. This raises another question - how to get angel funding, but this is a topic for a separate article.

I do not encourage the remaining three alternatives, because everyone has serious problems. You can easily name the lucky founders who followed these very paths, so they are worth nothing.

In custody

After all, read this page on the Sequoia Capital website.

Sequoia is one of the best investment companies in the world that has invested a lot of companies that you have heard about: Oracle, Apple, Yahoo and Google. On this page, Sequoia allows founders around the world to see a list of criteria by which they select startups, then there is a list of recommended steps you need to take, then you are asked to send a business plan.

I did not conduct an exhaustive study of the sites of other VCs to find out who is still so open, but the fact that Sequoia provides the world with the opportunity to be funded by them is a huge chance for a proper startup. Do not miss this opportunity.

This is the last article in the “about VC” series for the near future. From now on, I will try to focus on how to make a startup successful.