First-time entrepreneurs often complain to me that it’s too hard to get personal introductions to venture capital fund decision-makers, especially if they live in a different city or state.
From a VC perspective, requiring entrepreneurs to find a way to network to fund managers is a practical, survival-of-the-fittest test of the entrepreneur’s determination and creativity. They reason that successful entrepreneurs have to be unrelenting problem-solvers and evangelists for their companies. Finding a reference to a VC is a small challenge in comparison to the upcoming fight for customers, great employees and technology alliances.
But in this era of social networking, is there a faster way to get VCs to pay attention?
“Yes,” said Phil Sanderson, managing partner of IDG Ventures USA. “I use Twitter to communicate directly with entrepreneurs. If they follow me @SanFranciscoVC they know what trends I care about and what I am looking for in entrepreneurs.”
Anthony Ray, a Seattle-based, Grammy award-winning rap artist who is known as Sir Mix-a-Lot, used Twitter to reach out to Sanderson.
“I never really took Twitter seriously until I started using it for business. Through Twitter, Phil [Sanderson] gave me a lot of guidance on the right time to raise funds and how I should be thinking about my new startup,” said Ray.
Sanderson recommends that entrepreneurs spend time learning about the VC through their Twitter posts and improve their online profiles before making a first Twitter pitch.
“Whenever I receive a pitch from an entrepreneur I look at the entrepreneur’s profile for clues about the entrepreneur’s background and credibility,” said Sanderson. “Twitter is great because it forces the entrepreneur to focus and tell me exactly what they are doing or what they want to achieve. I will try out links to game prototypes and give my feedback too.”
Here are some other tips for networking to VCs:
Target the right fund. Research VCs that actively invest in your company’s industry and stage of business development. IDG Ventures invests in early-stage enterprise IT, new media, consumer Internet and gaming companies, however Sanderson says that IDG tries to invest in seven or eight seed-stage deals a year.
Target the right partner. Identify the partners who are responsible for evaluating opportunities in your specific industry. Most funds will highlight areas of their partner’s industry expertise at their websites. Use Twitter and blog profiles to help pin point VC partners that best match your company’s interests.
Sanderson estimates that approximately half of his deal flow involves gaming platforms or gaming technologies—industries that Sanderson believes will continue to represent strong potential for venture investors.
Network to portfolio companies. Always read through a target fund’s website for its list of “portfolio” companies that have already received funding support from the fund. Provided that the portfolio companies don’t represent any competitive conflicts of interest, contact the founders as a reference point to the VC.
Use your connection time to ask questions about the fund and how the founder succeeded in raising capital. Your job is to demonstrate that your company is worth a “first look” from VCs, not to explain every detail of your company’s business plan.
While Twitter and other social media platforms make it easier and faster for entrepreneurs to reach top VC partners, entrepreneurs still have to be willing to go through the fund’s specific process for reviewing new investment opportunities. This means that entrepreneurs should be prepared to take direction from a partner and work with other fund staff members to advance their deal forward.
Susan Schreter is an entrepreneurship educator and author of Start On Purpose , a comprehensive book to help entrepreneurs raise capital and boost the financial value of their businesses. Follow Susan on Twitter @StartOnPurpose.