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The search
for venture capital
Dear Small Biz
Adviser:
How do you find venture capitalists? I just completed my MBA. In
my final course, we had to create a business concept, complete research,
prepare a formal business plan and make a presentation. One of the
panelists, a banker, said most of our plans and presentations where
far better researched and presented than what he sees on a daily
basis. But the course didn't offer information on where to find
money without going to a bank. So, regardless of your business and
strength of your plan, how do you locate VC sources?
Thank you,
Jim
Dear Jim:
Your question is quite common. In short, venture capitalists do
not make themselves readily accessible to the public. As you can
imagine, they would be inundated with requests by phone, mail and
knocks on office (and home) doors if they personally advertised.
For lack of a better word, venture capitalists are
"fronted" by companies that will perform one or a combination
of the following:
- Screen potential investment opportunities.
- Conduct analysis of the content of a business plan.
- Conduct industry analysis, advising which avenues
offer the most promising investment opportunities for VC money.
- Oversee and administer venture capital funds.
In certain parts of the country, VC funds are high
profile by default. Business and industry in a particular area may
be well documented as primary vehicles for VC investments. A recent
example is Silicon Valley, including the cities of San Francisco,
Santa Clara, San Jose, Palo Alto and Redwood City, where high-tech
and dot-coms boomed a few years ago. Another excellent example is
the Boston area, around the Route 128 and 495 corridors, which is
surrounded by many companies, colleges and universities, including
MIT. This area is becoming quite popular in the area of nano-technology.
In such geographic locations where VC firms are well
known, it is easy to get names, addresses and phone numbers. However,
that is not a guarantee that you will get through the front door.
Many insist that you first send a document. They want to know whether
the proposal is worthy of any in-depth resources associated with
time and money.
Surfing the Net
You also can browse the Internet. My business-planning firm does
not actively participate in the submittal of documents and solicitation
of capital. That way, we can provide our clients with an unendorsed
directory of Web sites where you have the opportunity to submit
an executive summary or the entire business plan for review by venture
capitalists. This allows the investors to view the information at
will, maintaining anonymity without fear of being approached.
VC networks
A third option is to approach a local VC association or forum. Business.com
offers a directory
that may help your search.
Typically, these are nonprofit organizations directed
to creating networking opportunities for entrepreneurs. Usually,
this includes presentations before audiences of venture capitalists
and representatives of VC firms. If you attend enough of these events,
you will be able to identify potential investors and their representatives
hiding in the crowds.
To summarize, if you reside in a VC-intensive region
you should have little difficulty in identifying these firms. Elsewhere,
online sites offer the opportunity for exposure of your business
proposal. Finally, there are VC associations and forums that create
the chance to network with the investor community.
I wish you well.
-- Posted: May 30, 2002
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