Wooing Venture Capital - Insights from the Inside

On Tuesday, DreamIt Ventures was thrilled to host Albert Wenger of Union Square Ventures, Rob Adams of Next Stage Capital and Chris Fralic of First Round Capital - three early-stage venture funds focused on internet/technology companies. All are experienced entrepreneurs and business professionals who occasionally co-invest alongside each other. The group spent one-on-one time with each company, hearing their pitch and story. Afterward, they shared a panel presentation where they provided insights into attracting and working with VC firms.

Chris broke the ice with a “Top 10 List of Things You Should Know Do When Courting VCs,” including #1 Make it easy to contact you. Put your name, company name; email and phone number on all communications. Next, the conversation migrated to motivations and mechanisms of VC funds including the structure of the fund, who their clients are, the expectations of those clients and attributes they look for in emerging companies.

All three emphasized the importance of people in VC relationships. For VCs, they need to evaluate the people involved, not just technologies. All three agreed that it is better to wait three months to hire the right person for job than hire the wrong person now. Equally important, they felt entrepreneurs should expect support from VCs. As one attendee put it, VCs are not just checkbooks with faces. The management team of the VC (and their network) can often help emerging companies by providing advice, guidance and introductions.

Other questions related to the math of ownership with multiple rounds of capital (how IRR, % ownership, and market value can affect the amount of capital you can reasonably expect to raise) and the filter process (how many companies do they look at, how many progress (less than 1%), does the format change as you progress). One company member asked: “Do I have to show revenue to attract capital?” The panelists had different answers to this question with Albert offering that it was not necessary for his firm, and that they were comfortable with less developed plans. He pointed to Twitter as an example of focusing on the technology first.

It was a great session offering a unique insight into the world of Venture Capitalists and we thank Albert, Rob and Chris for their candid answers and advice.