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Getting noticed by a venture capitalist:
follow the three golden rules
By Jenny
C. McCune • Bankrate.com
 Last
year, David Yarnell of Brand
Equity Ventures perused 1,500 separate investment deals. Just
into the third quarter this year and he's estimating he'll scan
through 5,000 proposals by the end of this year. That's an awful
lot of deals to analyze and he's just an "average" venture capitalist.
He offers the following suggestions for catching the eye of an overworked
venture capitalist:
- Target your VC candidates. Make sure
there's a good fit in terms of what the venture capitalist wants
in an investment and what you have to offer. If you're a startup,
don't approach a company like Advantage
Capital Partners, which focuses on later stage companies and
expansion capital. Find firms that have invested in your industry
sector, Yarnell says.
- Get connected. To succeed in these
tough times, you or other members of your management team must
have pre-existing relationships with suppliers, customers and
investors. Those "ins" will open doors that would ordinarily be
closed to startups. If you don't have such connections, consider
hiring someone who does. It's crucial in order to get venture
capital today, Yarnell says.
- Go back to basics. Before the dot-com
frenzy, companies seeking investors had a well-thought business
plan and a compelling investment story. During the Internet heyday,
any company with a dot-com appendage was deemed investment-worthy.
Now the investment pendulum has swung back and venture capitalists
are going back to basics. "You need to have competitive advantage,
a real reason why someone would want to invest in you," Yarnell
says.
Those business basics also include being able
to describe quickly and succinctly what your company is trying to
do, what business it is in, and why it should succeed. "You wouldn't
believe how many business plans that I just scratch my head over,"
Yarnell says. "I have no idea what they're doing. You need to define
your business for me and why I should invest."
Jenny C.
McCune is a contributing editor based in Montana
If you'd like to make a comment on this story,
e-mail bankrate editors.
-- Posted: Sept.
1, 2000
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