Startup Tips: Introduction to Venture Capital

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Venture capital is a way of financing a startup, especially when seed rounds and investments from angel investors run dry. In a nutshell, early stage businesses with high growth rates receive funding from established firms through a dynamic venture capital ecosystem. This ecosystem can be intimidating for many new entrepreneurs, so knowing where to start and best practices is key to navigating the VC ecosystem.

What is Series A funding?

Series A funding is commonly known as the first step on the road to venture capital. Starting a business likely requires some form of fundraising, especially in the initial stages. Running a business is expensive and not everyone has change sitting around to just jump start a business idea and that where Series A venture capital comes in.

Venture capitalists can make low-scale fundraising efforts look minuscule. In 2018, the average Series A funding was greater than $11 million. This shows how venture capitalists can significantly impact the power of a business.

Furthermore, data on growth rates and quarterly income can prove to investors the value of your company’s products or services. Ultimately, VCs want to invest in companies with high ROIs.

Identify the Right Venture Capitalists

Research different venture capitalist firms and identify the firm’s core competencies and areas of conviction. This could help narrow down your search because some venture capitalists may have investments in competitors.

Network with Venture Capitalists

Getting a meeting with a venture capital firm is a lot easier said than done. Cold emails blasted out to firms won’t do you much good. The power lies in networking and warm introductions—it’s all about who you know. If you can manage a warm introduction, this is a great place to start. A warm introduction can be described as when a third party recommends an entrepreneur to a venture capitalist. This helps venture capitalists efficiently manage their time and meet with business owners relevant to their interests.

Of course social networking is always a great place to get your foot in the door. Networks such as Twitter and LinkedIn are good places to find investment communities and become part of the discussion. Identify the active partners who invested in a recent venture-funded startup and connect with them online.

Making the decision to transition to Series A venture capital funding isn’t an easy task. However, educating yourself on the ecosystem and how to position yourself for success can help diminish intimidating factors. To help set you up for success Embroker put together a guide to raising venture capital that covers terms, pitch deck best practices and tips to help you prepare for a meeting with venture capitalists. Be confident and reach new heights with venture capital funding!

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