AFTER THE BUSINESS PLAN - HOW TO FIND MONEY
(February, 2000)

• Introduction
• The "Somebody"
• After the Referral

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Introduction

You have prepared your business plan and now you want to find money to fund your great idea for a technology startup. So, how do you get anybody with money to read it?

You could research VC firms on the Web, but these are not good starting places. The general rule is that unless you know "somebody," you are not going to be funded. Yes, there are exceptions and you could hit the jackpot with an exception to the rule, but instead of gambling on a jackpot, I suggest you play the percentages and look for money from those you know. If you don't know the right people, you need to look for an introduction from somebody who can bring your business plan to those with the money who are to find a good investment.

The "Somebody"

he "somebody" can take many forms. It can be "somebody" with money to invest. If your best friend in high school just happens to be with a VC firm that funds your type of deal, you just won the Lotto. Most of us aren't that lucky, and settle for second best.

"Somebody" could be a relative, friend or business acquaintance who knows the people with the money. It could be somebody who may not know you that well. Still, any personal connection is better than mass mailing business plans to VC firms.

"Somebody" may not have any money to invest, but just may know somebody who does. You need someone who knows the right VC and is trusted by that VC. Their personal introduction and their credibility may be the ticket you need to have your business plan carefully considered.

When seeking venture capital, you must look at everybody you know as an important link in your network. Its all about networking and who knows who. If you don't know the right people, expand your network. The concept is easy, but the implementation is time consuming, frustrating, and difficult.

You can never hand out too many business cards or executive summaries, or give too many "elevator pitches." An "elevator pitch" is a complete explanation of why your idea is incredible. What makes it an "elevator pitch" is that you present it in less time than it takes the elevator door to close and reopen on your victim's floor. (Practice it!)

The human element is very important here. You must meet people everywhere. You never know who will be the contact that brings you to the right person. You might want to check out http://venturea.com/clubs2.htm where you can find an apparently reasonably current list of venture capital clubs or groups. These clubs can be a great place to network. Here's where you may meet the people that can help get your startup started. Also, look to professionals (attorneys, investment bankers, accountants, etc.) who frequent your local clubs. These non-VC professionals may also be able to plug you into some money.

You Are going to need an attorney and accountant anyway. You may as well choose professionals who are networked into the funding sources in your community.

A professional who is willing to stake their reputation, in this close knit community, behind your business plan may just be the type of introduction you need. Be careful though, many will ask for an arm or leg to give you that introduction.

Venture capital firms are typically bombarded with more business plans than they can carefully analyze. The point of all your networking is to personalize it when somebody reads your business plan. Whether the funding source knows you (the best alternative) or knows the person who brought the plan to them, either way you are not just another anonymous plan. The personal contact is one of the traditional keys to success.

After the Referral

You'll know that your networking is paying off when you start getting referrals to VCs. Even with a referral, you should not assume that you are going to get much time to make your pitch.

Before your first phone call or meeting with the VC, check their website. Learn everything you can about them. Don't waste their time! Don't assume that your referral source referred you to the right VC. If they're the wrong VC, try to turn that VC into a referral source to another VC. Keep the network churning.

You can befriend the "wrong" VC by being on the ball and getting right to the point. In checking the website, look for answers to basic questions like what rounds and size they invest and what areas they invest.

In your first conversation, ask if they are actively investing right now, would they like more information and how would they like that information. Do they prefer fax, e-mail or overnight delivery? If it is the wrong VC, don't belabor the conversation, but do ask if they know anybody who might be interested in investing. Be quick on the uptake and you will add to your network.

Remember that everybody you know and everybody you meet is a part of your network. Cultivate all of your relationships and with a bit of luck, you'll find the right source for funding your startup.

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