The VC’s holiday home
Your startup is like a holiday home.
A VC is looking to spend a big chunk of money on a discretionary purchase.
They don’t have to buy anything, there are lots of homes for sale and they aren’t in a hurry. (it’s you that needs a roof over your head, not them).
They would like to make a sizeable profit when they sell it in a few years time, so it has to be something they think will appreciate in value and interest other (future) buyers.
They aren’t going to live in it, but they will visit regularly (and sometimes on a whim) so it needs to be easy to get to.
It has to be something that suits them, as they will be stuck with it for a few years.
Most want a property they can just use immediately, some braver ones might take on a project that needs work, but only if it charms the pants off them.
So your job as a founder is to act as an estate agent for your ‘property’.
There are 2 ways to go about this:
- Scatter gun (like the timeshare salesman), send out plans to all possible funders all over the world, irrespective of their interest, availability of funds etc. – We are all guilty of this, but it is a waste of time both theirs and more importantly, yours.
- Targeted (like a professional salesman), research the available funds, by location, sector and size of investments, stage etc. (look carefully all rules they publish), then get to know a small number of funds in a relatively informal way, find out what they like and dislike, listen to their comments incorporate them into your plans (if possible).
Actually there is a third way, which is to have a list of possible startups (all variations on a theme hopefully) and pick the one that you and your ‘favorite’ VC like best (based on a number of discussions).
With an angel investor, you often are competing for their money with, guess what, a house or a yacht in the sun!
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