Southeast VC

Tips for Emailing Your Plan to VCs

Is your company looking for funding? Are you thinking about emailing your company’s executive summary or business plan to venture capitalists? Stop and read this first. It might help you increase the chances of a favorable response.

Stating the obvious, venture capitalists receive a lot of email from entrepreneurs looking for funding and it arrives in several different ways. Some of the email looks like a form letter with the name of the recipient dropped in – most likely a mail merge blasted out to hundreds of individuals. Even worse is when an entrepreneur uses a large list of venture capitalists’ email addresses and sends them all the same email by using the bcc email function. This style of sending an email rarely engages a venture capitalist. How many emails have you responded to like that? Those who have tried this strategy will attest that response rates will be low.

If you are contacting venture capitalists and plan on sending out your executive summary or business plan by email, here are four suggestions to make sure your email stands out and receives the attention it deserves.

1. Get introductions to venture capitalists.

The chances of getting a venture capitalist’s attention in reviewing your business plan increases greatly if you know someone that can make an introduction for you. This will really make a difference. The business plans that arrive with a referral are often reviewed first and the response time to the entrepreneur is much faster. Even if you’re just starting out and you just hired an accountant and lawyer – ask them to put in a good word for you. Many of them work with local venture capitalists and some have venture capitalists and angel investors as clients.

This is the first opportunity to prove to venture capitalists that you have the ability to open doors. It is a key skill that venture capitalists specifically look for since your network is going to be increasingly important as you grow your business with customers and partners.

2. Thoroughly understand the criteria.

Before sending a venture capitalist your business plan, make sure you thoroughly understand their criteria and geographic preference – which is available on the firm’s Web site. As an example, if you are in Atlanta, avoid the mistake of sending a business plan to a firm in Silicon Valley when the firm clearly states on their Web site that they only invest only on the west coast.

3. Send individual emails.

If you choose to send your business plan by email, build specific emails and customize each one to the venture capitalist you are targeting. The bulk email strategy mentioned earlier may be deleted or caught by the venture capitalist’s spam filter. This is the opportunity to position your company in the most professional way.

Also, I would recommend against sending your business plan to every partner in the firm. Using your network, find the best contact within the firm and send it to that individual.

4. Be persistent and follow up.

If its been more than a month since you emailed the business plan and you haven’t heard back from a venture capitalist, send a brief email to make sure they received your plan and maybe attach a recent press release to show how your company continues to make progress.

The Real Numbers - Don't Forget the Angels

I think PWC, Thomson Venture Economics and the NVCA do a great job every quarter tabulating venture stats. When I was sitting in PWC's quarterly breakfast the other day (called Shaking the MoneyTree) they shared the stats for Q3 and a couple of things were pointed out that I thought it would be worth sharing:

- For the most part, the investments they track do not include ones made by angel investors - which is important to watch - given its size. Interested in taking a closer look at those numbers? The University of New Hampshire's Center for Venture Research does a good job with that. Just as an example, they show that for the first six months of 2004, 135,000 angels invested $12.4 billion into 27,500 companies. Software was the most popular sector grabbing 37% of the dollars. The $12.4 billion deployed by angels compares to $10.9 billion invested by VCs during that same period. This clearly shows the huge importance of angels in the market.

- As many of us already know, some VCs and the companies that receive the funding do not report the numbers to PWC and do not announce a round publicly for strategic reasons. These companies feel if they keep the financing quiet, it will give them a competitive edge over the (potential) competition. In some cases, I agree with this.

NCEITA 21 Awards

Last night I attended the NCEITA 21 Awards Celebration - an annual dinner showcasing accomplishments in excellence, innovation and leadership in IT. The great news is that over 300 people attended - which was the largest crowd ever. Congratulations to all the winners.

Sears Passes on Opportunity to Invest in Microsoft

Interesting article in the Boston Globe about the deals that some VCs passed on for a variety of reasons - eBay, Intuit, Amazon.com and Apple.  Even Allstate Insurance (owned by Sears at the time) passed on the opportunity to buy 20% of Microsoft for $8 million according to Howard Anderson, Sr. Managing Dir. at YankeeTek Ventures. A pretty humbling experience for those that missed the ride and hopefully a good inspiration for those that think they have a good idea, but are getting turned down by a bunch of VCs.

Selecting a VC - Entrepreneur's View

Following my post a few days ago, I thought it would be good to follow it with an entrepreneurial view. I write a monthly column for Triangle TechJournal and this one appeared a few months back: Local CEOs Discuss VC Lessons Learned.

Selecting a VC

As I have always stressed, it is exceedingly important to know who your partners are. Accepting an investment from someone you are unfamiliar with can be a recipe for disaster. That being said, the timing seemed right to put together a quick guide to help entrepreneurs evaluate venture capital firms. You can quickly find other comments on this topic from other VCs including Stephen Hall Finding the Right VC, Jeff Nolan Pick Your VC Carefully and Jeff Clavier Pick Your VC Carefully...If You Can.

Find an experienced VC that has been in your shoes

Find a venture capital firm that is filled with people that have been in your shoes as entrepreneurs and have been successful at it. Do they understand your space enough to challenge you when it matters most? Are they passionate about your business and able to add to your vision? Are they able to open doors for you to potential customers and partners? Make sure they will stick with you both in good times and bad.

Performance speaks for itself

How successful has the firm been? How have their portfolio companies done?

Will the VC give you the time that you deserve?

Some VCs sit on a ton of boards. Are the partners stretched too thin? Find out which partner will be working with you and make sure they will have the time it takes to give you the attention you deserve. But also make sure you readily have access to their entire team and advisors.

Find someone local

If possible, try to get a local investor to be part of the round. If you want to bounce ideas off someone quickly, having someone close by works really well.

First impressions are important

In the first meeting with the venture capital firm, do they seem anxious to get you out the door in a hurry or do they spend time with you learning the business and offering advice? What kind of questions do they ask? Are they the standard questions everyone asks or are they engaged and ask questions that show they understand your business?

Make plenty of calls before partnering

Make sure you do your homework. I would suggest calling around to see what people say about the venture capital firm you are speaking with - especially as the conversations mature. Call the executives they have funded, accountants, lawyers, etc. What is their experience with the VC? Any firm worth their salt will connect with an executive within any of the companies they funded.

How connected is the firm to help with future financings?

Think about the future. Again, as the conversation matures, ask them about what other firms they prefer working with and who might have an interest participating if you need more financing down the road. Do they have the right network to bring in larger funds if needed? Do they have a track record of jumping in and helping make introductions or do they leave that in the hands or the entrepreneur?

Is the VC a long term, big thinker?

Are the partners patient investors or are they more interested in selling the company in a few months? Partner with someone that can add to your vision to build a large, sustainable business and has the patience it takes to get there.

Are the partners fun to be with?

Can you picture yourself partnering with them and working with them for 5 to 7 years or longer? A local VC told me recently that as part of due diligence, he plays golf with the CEO. You learn different things when you are not in a business environment. It doesn't have to be golf - maybe it is as simple as dinner and drinks, but get them out of the normal business environment and you will get to know them even better.

CED Venture 2005

The Council for Entrepreneurial Development (CED) announced last week that Venture 2005, one of the largest venture conferences in the Southeast is scheduled for April 26-27 at the Pinehurst Resort in Pinehurst, NC. For those that have not attended, this is a great annual event for both entrepreneurs and VCs. I would encourage companies looking for funding to apply to present - the early application date is November 30th. Only NC-based companies can present, but if you are not in NC, come anyway! There will be a lot of VCs attending - from all over so you should be able to make some great contacts. Companies presenting have a pretty good track record of raising money from the conference - raising over $1.6 billion since 1999. And if you're a golfer (I am not), you will know that Venture 2005 is held at the same location as the 2005 U.S. Open Golf Championship.