Building Relationships with Investors: Should You Talk to VCs Before Seeking Angel Funding?

Dear Quora community and fellow entrepreneurs,

Thank you to Simon for your insightful comments. I've already engaged with several Venture Capitalists (VCs), but it’s important to emphasize the value of building relationships with them, especially those who focus on the online video space. These connections lay a solid foundation for future funding opportunities, much like the relationship dynamics that stabilize an ecosystem, making it sticky and fertile for success.

Why Build Relationships with VCs?

For entrepreneurs who have the time and eventually plan on raising venture capital, reaching out to VCs early is a game-changer. The primary reason is to establish a solid, pre-existing relationship. By doing so, you ensure that when the time comes to seek their capital, VCs are familiar with both your company and your plan. This familiarity is crucial, as it reduces the barriers to entry and allows for a smoother fundraising process.

Additionally, building these relationships offers a dual benefit. You get to know the VCs better, understand their preferences, and what they are looking for in a company. This mutual understanding is invaluable as it enables more informed and strategic investment decisions, fostering long-term partnerships. Just as in any other professional network, these early interactions can also lead to introductions to other potential investors, such as Angels, and provide valuable insights and guidance.

Steps to Engage with VCs

If you are planning to raise venture capital, there are specific steps you can take to build these relationships effectively:

Be Proactive: Unlike waiting for investors to come knocking, being proactive in reaching out to VCs shows your initiative and commitment. This also sets the tone for a collaborative and trust-based relationship from the start. Measure Interest: Use different channels to gauge the level of interest from VCs. This might include cold outreach, networking events, or proving your concept through a seed round or pilot project. Transparency: Always be upfront about the status of your company and your fundraising goals. Honesty builds trust and respect, which are essential for a strong investor relationship. Stay Engaged: Keep the conversation alive. Active engagement can be through regular check-ins, sharing progress updates, or even collaborating on industry insights. Learn: Take the time to understand the investment process, their decision criteria, and the challenges they face. This knowledge will help you tailor your pitch and strategy for success.

Furthermore, take inspiration from successful investors like Mark Suster and Fred Wilson, who have written extensively on the importance of building and nurturing relationships with investors.

Conclusion

Building a robust network of investors, particularly VCs, doesn’t just prepare you for your funding journey; it also enhances the quality of your relationships and the value you can bring to the table. As you move forward, these relationships will be instrumental in helping you secure the capital you need to grow and succeed.

Good luck on your entrepreneurial journey, and remember, the right relationships can make the world of difference.