| Many ventures are faced with the challenging task of | | | | decisions and typically take a seat on each portfolio |
| raising venture capital. The first part of this process is | | | | company's Board. Partners tend to invest in what |
| finding the right venture capital firm (VC). While this | | | | they know, so finding a partner that has past work |
| may seem simple, it isn't. There are thousands of | | | | experience in your industry is very helpful. This |
| venture capital firms in the United States alone, and | | | | relevant experience allows them to more fully |
| going after the wrong ones is one of the most | | | | understand your venture's value proposition and gives |
| common reasons why companies fail to raise the | | | | them confidence that they can add value, thus |
| capital they need. | | | | encouraging them to invest. |
| When seeking a venture capital firm, there are six | | | | Portfolio: Just as you should seek venture capital |
| key variables to consider: location, sector preference, | | | | firms whose partners have experience in your |
| stage preference, partners, portfolio and assets. | | | | industry, the ideal venture capital firm has portfolio |
| Location: most venture capital firms only invest within | | | | companies in your field as well. Portfolio company |
| 100 miles of their office(s). By investing close to | | | | management, since they are industry experts, often |
| home, the firms are able to more actively get | | | | advises VCs as to whether the company in question |
| involved with and add value to their portfolio | | | | is worthwhile. In addition, if your venture has potential |
| companies. | | | | synergies with a portfolio company, this significantly |
| Sector preference: many venture capital firms focus | | | | enhances the VCs interest in your firm. |
| on specific sectors such as healthcare, information | | | | Assets: Most companies seeking venture capital for |
| technology (IT), wireless technologies, etc. In most | | | | the first time will require subsequent rounds of capital. |
| cases, even if you have a great company, if you fall | | | | As such, it is helpful if the VC has "deep pockets," |
| outside of the VC's sector preference, they'll pass on | | | | that is, enough cash to participate in follow-on rounds. |
| the opportunity. | | | | This will save the company significant time and effort |
| Stage preference: VCs tend to focus on different | | | | in maintaining an adequate cash balance. |
| stages of ventures. For instance, some VCs prefer | | | | Finding the right venture capital firm is absolutely |
| early stage ventures where the risk is great, but so | | | | critical to companies seeking venture capital. Success |
| are the potential returns. Conversely, some VCs | | | | results in the capital required and significant assistance |
| focus on providing capital to firms to bridge capital | | | | in growing your venture. Conversely, failing to find |
| gaps before they go public. | | | | the right firm often results in raising no capital at all |
| Partners: Venture capital firms are comprised of | | | | and being unable to grow the venture. |
| individual partners. These partners make investment | | | | |