How to Build a Relationship with a Venture Capitalist
Your have chosen to contact a venture capital firm. VC firms don't lend money, what they do is invest in return for equity. For this reason, the first step that you should take is to find out the most suitable firms for your type of business. If you appeal to those that deal in your type of industry sector, they will be more likely to be interested in your ideas: they understand your vision, have previous experience and knowledge in your field, they can offer support and expertise. There are some key factors that can help you minimize the amount of time, expenses and stress when looking for the right VC.
1. Honesty
Being honest with your potential investors means revealing your needs and expectations, as well as your reasons for choosing this type of business. They are going to ask questions related to this and they have a lot of experience with people, so trying to beat around the bush would not be the best option. Instead, give clearly structured answers, supported by logical arguments, as what they expect from you is proven maturity and awareness of the business process. There may also be some riskier aspects of your plan, but VCs expect this and they can help you fortify these weak points.
2. Patience
Not receiving an answer weeks after having submitted your executive summary could be frustrating for most entrepreneurs. Your patience with venture capitalists is very appreciated, as they are extremely busy, their roles ranging from managing companies to making investments. They may have piles of executive summaries waiting to be evaluated. This is why VCs may seem unresponsive at times. It could take them weeks to finally make a decision, but, if it takes longer, it's appropriate for you to politely follow-up with them.
3.Portfolio focus
In case you don't receive capital from a specific firm, you should not take it personally, as there may be various reasons for that, possibly entirely unrelated to your business. What business investors look for is a viable, high growth business, with a good return, aligned with the fund's investment criteria. Regarding portfolio focus, if they have never invested in the industry in which you operate, they may need extra time for research as well as sufficient data. If they already have significant exposure to your field, meaning they also may be less likely to provide funds, unless your idea is remarkable.
Successful entrepreneurs have the ability to engage VCs on a level more personal than the business side of the relationship . Why develop a personal relationship with a business investor? The advantage is that the fundraising process could become more enjoyable and significantly easier. You should also be open to feedback and consider it useful advice and guidance through the extremely challenging but also rewarding business process.