Entrepreneurs: How to Find Venture Capital

Aug 26, 2013

venture capitalWhat is one of the biggest deterrents to starting a business? Most would-be entrepreneurs will say it in just one word: capital. Sure, capital can be the catalyst for a new business launch, but the lack of it can keep a great idea from being realized. There are plenty of “big-concept” entrepreneurs who want to raise money for startup and expansion but they don’t know where to find venture capital funds. According to a recent article in Entrepreneur, “A Quick Guide to Finding a Venture Capital Match,” most first-time fundraisers mistakenly pursue a short list of funds, or even one fund. Your chances of getting fully capitalized will increase dramatically by approaching a long list of funding sources.

Who are some of the major players?

Here are a few of the largest funds that invest in a wide range of businesses: Sequoia Capital, Kleiner Perkins Caufield & Byers, Polaris Partners, Bessemer Venture Partners and Andreessen Horowitz. Before approaching one of these funds, be sure your company matches up to their investment criteria and connect directly with the individuals that specialize in your industry. Add other VCs to your solicitation list as well.

How to approach a venture capital firm:

Regional firms: Many large venture capital funds consider investment opportunities from anywhere in the United States. However, in reality venture capitalists (VCs) prefer to invest close to home. It is much easier for them to stay in contact with local entrepreneurs. VCs travel quite a bit, and don’t want to travel more unless they absolutely have to.
Who are the regional VCs?

In order to improve your chances of being funded, do everything you can to appeal to the regional VCs. Here are some regional players to consider: If your company is located in the Southeast, check out Diamond State Ventures, BVM Capital, CapitalSouth Partners, LongueVue Capital Partners, Massey Burch Capital and Intersouth Partners. If you are in the Northeast or Mid-Atlantic states, check out Grotech Ventures, Mid-Atlantic Ventures, Ben Franklin Technology Partners, Milestone Venture Partners and NewSpring Capital. In the Pacific Northwest, look into Madrona Venture Group and Montlake Capital. In the Midwest, Open Prairie invests in software, life sciences and communications businesses.
Seed-stage funds

If your business is still in the seed stage, some funds to investigate include M/C Ventures, Launch Capital, Cambridge Light Partners, Bee Partners, Cedar Fund, New Enterprise Associates, Floodgate, Pod Venture Partners and Crosscut Ventures.

Industry-specific funds

Most successful entrepreneurs have had better success when approaching funds that appeal to their specific industry. Sure there are plenty of funds that invest in a “broad” range of industries, but they are also bombarded with proposals.
Here are some industry-specific VCs:

Security and defense: Trident Capital, Chart Venture Partners, In-Q-Tel and OnPoint Technologies invest
Active energy and clean-tech: Khosla, Nth Power, Massachusetts Green Energy Fund, MissionPoint Capital Partners and CleanTech Partners.

Media and entertainment: Hearst Interactive, Comcast Ventures, Lerer Ventures, Elevation Partners, Redpoint Ventures, Downey Ventures, InterMedia Partners.

Active life sciences and health care: Hatteras Venture Partners, TPG Biotech, NDI Healthcare Fund, SV Life Sciences, Pfizer Venture Investments, ARCH Venture Partners and Oxford Bioscience Partners.
Information technology: SAP Ventures, Sevin Rosen Funds, Intel Capital, Oak Investment Partners, Greylock Partners, Highland Capital Partners, North Coast Technology Investors, Entrepia Ventures and Flybridge Capital Partners.

Don’t give up

It may be discouraging at first when your efforts don’t yield the funding you desire, but don’t get discouraged. These investors like to take their time to fully understand an investment opportunity and they want to know why you’re the perfect person to lead your company to success. Your job is to educate as many potential investors as you can, but keep in mind that this active solicitation process won’t end after you secure a first round of funding. It’s good practice, so keep it up. Chances are you will be speaking with lenders and investors right up until the day you sell your business.

Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net