How to Get Venture Funding, page 14

How to Approach a VC, continued

It is vitally important to be prepared, to have done your homework.

When you approach a VC, don’t be paranoid. It’s the VC’s job to learn about your business. Any hesitation to disclose salient details will damage your effort. If a VC wants to know about your technology, be thankful they are interested at all. Don’t be obstructionist about handing over technical details and documents.

For that matter, no VC will sign an NDA (nondisclosure agreement) under any circumstances. By asking for one, you have marked yourself as an amateur. Almost inevitably, your business will not get funded; by asking for an NDA, you have knocked yourself out of the game at a very early stage.

It comes down to this: venture capitalists have better things to do then steal your ideas. If they think your ideas are good enough to be worth stealing, they might fund them. But you have to make up your mind. If you are going to be paranoid about the process, then don’t even try to get venture funded. If you are attempting to get venture funded, then act to maximize your chances.

Hot and Cold Deals

The venture capital community—particularly the Silicon Valley VC community—is very small. VCs talk to each other, so if you approach a lot of them, or take a long time to get funded, you’ll get a reputation for having been shopped around. Obviously, this is not the reputation you want.

You want the exact opposite—an aura of being the hottest thing since sliced toast. Generally, really hot deals project an image of mystery. Nobody knows exactly what the start-up does, but everyone is talking about it. (A good example of a company that successfully used this approach for many years is Transmeta, one of Silicon Valley’s longest running “skunk works,” or deep cover, operations.

It makes good sense to approach some second- or third-tier VCs that you don’t really care about first before going after the ones that you do care about. If there are glaring holes in your presentation, the first few VCs will point them out. Your presentation and story will only get better with practice.

Continued next page

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