According to Andrew Dudum, co-founder and partner at San Francisco-based venture firm Atomic, it’s important for the long-term health of a start-up that — immediate cash needs notwithstanding – VC partners should be carefully selected.
“Your VC firm will be your critical advisor moving forward and can provide guidance and company-altering insight,” says Dudum. Given this, here are his five tips for choosing a venture firm:
- Set a timeline and stick to it. “Raising capital is incredibly distracting to your core business,” Dudum says. “You are out of the office, away from the team and removed from your customers and product.” For this reason, it is crucial that you set a target timeline and do your best to hit it. “The sooner you close the round, the better,” he says.
- Know what you’re bad at. If you need help reaching distribution partners, for example, hook up with a venture firm that has those kinds of connections. If you need to fill out an executive team, seek out firms with that kind of expertise.
- Do your diligence and only target firms that are the right fit. “Raising venture funding is incredibly hard, but raising it from a VC firm that, at its core, does not invest in companies like yours is nearly impossible,” says Dudum. This is why start-ups should do research on the firms they’re interested in before even seeking a first meeting. The Crunchbase search engine is a good starting point.
- Partner matters more than firm. The partner will be your primary contact at the firm, and they will be with you through the hardest times. “It’s fundamental that you not only really enjoy spending time with that person, but that you trust, respect and have a great rapport,” Dudum says. In the end, your impression of the partner is much more important than your impression of the firm itself.
- Optimize for the size of the total pie, not for the size of the slice. As a start-up, the funding round you’re preparing for probably won’t be your last, so don’t focus on short-term benefits alone. Ask yourself how a particular VC firm and partner could help your company in the long run, whether it’s raising more money later on or hitting some other milestone. As Dudum puts it, “Find the team and partner that you believe will help you build the best, tastiest and biggest pie in the years to come.”
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