What To Do When Your VCs Just Don't Get It
Raising money for your idea or start-up is tough enough. As capital becomes scarce and barriers to entry become lower, venture capitalists are raising their expectations for start-ups. Here are five tips for raising money when venture investors just don’t seem to get it.
1) Talk to experts
Venture capitalists say they love disruptive ideas, but if your idea is really new, or if your industry is changing really quickly, venture capitalists might not have had time to do their homework and get caught up with you. On the other hand, industry experts will know the little wrinkles of what’s going on, and will be able to understand why you’re different. Find these people--and the investors they work with--and show them what you’re up to.
When the time comes, one start-up veteran recommends you ask these experts if they will serve as references when VCs are trying to validate or deny your company’s potential. Be prepared to give your references talking points, such as details on your market and how your company fits into it.
2) Talk to other VCs or find competitors
Another tactic is to grow a thick skin and move on. There is a common saying among entrepreneurs that it's easier to find a new investor than to change one's mind. Many startups raise seed and series A rounds simply by going through the interview process. Investors are often looking for companies that match a pattern with metrics they are comfortable with. Don't waste time and energy on investors who are looking to match patterns you’ll never fit.
3) Talk up numbers and educate on your space
Sometimes it can be as simple as education -- your space may have its own quirks or trends that investors don’t know about. Talk up those points and break down the information into relevant points that are easy to follow. Rebecca Woodcock, co-founder of Cakehealth, was one of the first to come up with an online system to help consumers manage their healthcare bills. She notes, “I always have a handful of industry reports ready to send to investors to help them understand the specific trends I'm watching. For each report it's important to call out bullet points.”
4) Whitepaper or expert publication
If there isn't enough information out there on your niche or space, then publish it yourself. Whether it’s something odd about your space, an area you plan to disrupt, or just simple statistics, you can make a SlideShare, write a whitepaper, or collaborate with other experts in your field to cross-publish something. Show that you can be a leader in your area of expertise.
5) Find your “Esther”
Listening to early criticism of your pitch can also be huge help, and if there’s something you hear a few times, you need to find a way to address it. In my case, I was frequently asked if Esther Dyson, an investor known for having an interest in health apps and software, was involved in my startup. After being asked this a dozen times. I finally got a meeting with her and convinced her to join in. While it took some time, for me, this was a crucial step to overcoming funding hurdles. Other companies might need to convince a critical advisor or client.
Not all VCs are created equal. Many investors are excited to invest in new spaces. Break down the important information in a way that makes it easily accessible, and show that you can be a leader, even in the great unknown.
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