But I do not know a single investor

Previous parts: First part , Second part .

In a previous article in this series, I talked about what to do if you were refused investment.

However, this suggests that you were able to find a VC.

What to do when you have a startup that you want to be invested in, but you don’t know a single VK?

Of course, I am familiar with this situation. When I was in college and worked on Mosaic at the University of Illinois, the definition of “venture capital” meant as much to me as “klaatu barada nikto” (translator's note: a symbolic phrase from the movie “The Day the Earth Stopped”"1951, this phrase was supposed to stop the robot Gort'a from destroying the earth). I have never met a VK, and not a single VK has ever spoken to me, and I would never even have recognized him if I had to face him nose to nose. If it weren’t for Jim Clark, I’m not sure that I would ever have managed to get money to create a company like Netscape, for example, even if I could just start a company to get started.

The starting point for obtaining investments in case you do not know any VCs is that you should realize that VCs mostly work according to recommendations. They hear about a promising startup or founder from those with whom they have already worked, such as another founder, or a CEO, or an engineer from another startup they have already invested in, or a business angel with whom they previously invested in any project.

This is a simple mathematical formula; each VC can finance only a small number of startups, and when financing 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, VK has to rely on others to weed out hundreds to 15 or 20, so that he can spend time looking for what he needs, among these 15 or 20.

Therefore, sending a business plan on a "like a whirlwind" basis to an investment company is tantamount to sending a scenario according to the same principle to a Hollywood film company, i.e. completely pointless. Therefore, your main task should be to get into those 15 or 20 that VC meet with, relying on their environment, and not 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 VK, you will be overwhelmed by your startup in need of investment, founded by someone who knows what he does, and that 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, return to the previous article, go through all the points and correct your business plan before you go to a meeting. The only reason that VCs meet startups only on recommendations is that most of the hundreds of startups they could meet with would be unprepared and uninformed, and as a reason not worth the investment when they meet. Therefore, in your hands there is an opportunity to break through the crowd by making a magnificent first impression, and for this you need to think it all a few steps forward and do everything in advance to make your steps confident, and your business plan is a masterpiece.

The best option for you would 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, a beta version or prototype in any form will work: a working, but not yet launched web site, a model of a program with partial functionality, or something 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 whatever suits your project best.

With a work product that may be the basis 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 the product.

In case you didn’t succeed with the product, but also with users and customers, be sure that you will need such a brilliant presentation, how much you can create, in which there should be: models, screenshots, market analysis, customer base research, such as interviews with potential customers and more.

Do not write a comprehensive business plan. Most VC invest in projects based on a brilliant presentation of 20 slides, or do not invest at all. Consequence: VC, which requires a thorough business plan, is probably not the VC that you need to work with.

Explore, Explore, Explore

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

About creating contacts

The best way to establish contact with VK, as it seems to me, is to work in an invested startup, to be the best, get a promotion and connect to the environment.

If you cannot go to work in an invested startup right now, 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 a raise and connect to the environment.

And if you cannot go to work in a good technology company, then go and get a bachelor's or master's degree at 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 a promotion and connect to the environment.

It sounds like I'm mocking, but in fact I am very serious. This is the path that many of the founders of invested startups I know have chosen.

A few other ways that don't take so long

If you are still in school, then immediately go or plan a transition after graduation to a large research university that has good connections with the VK 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 probably useless to say that Silicon Valley VCs always roam around looking for the next Jerry Young or Larry Page.

In contrast, at the University of Illinois, where I studied after graduation, cows that mutated for life in the cold climate mostly “roam”.

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

Read VK blogs. Read them all, and read them very, very carefully. VCs that run blogs provide the founders with a great service by providing very useful information and the ability to contact them via email, comments, or even downloading podcasts. Each VK differs from the other in possible ways of communicating with people on the network, but in all ways try to contact most of them.

First, you will find out which VCs, which types of companies are of interest. In the best case, VC can enable its readers to communicate with it in any way, including applying for e-mails about start-ups corresponding to its categories.

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

In addition, many VK are passionate lovers of new ways of communication, for example, Facebook or Twitter. According to observations, a VK that seeks and uses new methods of communication will prefer to communicate with people using this new type of communication. Therefore, when something new appears from this area, go there and find out which VK use this method and communicate with them in this way, of course, it is prudent.

Often, the idea of ​​a startup founder who is looking for an investment to blog about a startup, about interesting things that are happening and about their thoughts is very good. This idea takes the founder into the mainstream of communication, which can lead to contact with VK, and when VK 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, to create or contribute to a well-known open source project. The open source movement is a great opportunity for programmers around the world to not only create useful software that many people can use, but also to build a reputation for themselves, regardless of what they do in their normal work. More effect than simple steps makes it possible to send a letter to VK, which will say: "I am the creator of the program" A "with open source code, which has 50,000 users around the world, and I want to tell you about my new startup" .

If you use at least some of these methods, then in the end you will have the opportunity to communicate with some VCs in ways convenient for them, and this can lead, subsequently, to communication on the topic of financing, or even acquaintance with other VCs.

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

If all else fails

The alternatives, in decreasing order of magnitude, to you may be, it seems to me: business angels, service contracts or early users, working on a regular job and starting a startup in your free time and on a credit card.

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

I do not encourage the remaining three alternatives, as everyone has serious problems. You can easily name the lucky founders who followed these paths, so they are worthless.

In custody

In the end, read this page on the Sequoia Capital website.

Sequoia is one of the best investment companies in the world that has invested in the many companies you have heard about: Oracle, Apple, Yahoo, and Google. On this page, Sequoia enables founders around the world to see a list of criteria by which they select startups, then a list of recommended steps that you must take, then a request for sending a business plan.

I did not conduct an exhaustive study of the websites of other VKs to find out who else is so open, but the fact that Sequoia gives the whole world 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 VK” series in the near future. From now on, I will try to focus on how to make a startup successful.