RWI Group: Entrepreneurs FAQs #10

Yes and no. Only a small fraction of business plans received by venture capital firms result in a meeting, and a small percentage of those meetings result in funding. For these reasons, entrepreneurs seeking funding should contact several firms simultaneously. However, it pays to target potential venture capital investors by their stated interests. By ensuring that the industry, stage, investment size and geographic preferences of venture capital firms are aligned with your business, the venture capitalists will be more likely to devote energy to understanding and evaluating your company.

At RWI Group for example, we are focused on communications, software, semiconductors, and life sciences. While we have on occasion made investments in other areas, we would be unlikely to make an ideal target for non-information technology or non-medtech investments. Although the Internet has facilitated the ability to reach many organizations quickly and cheaply, it still pays to carefully target firms whose investment profiles match a particular opportunity. This is human nature. Think of your own snail mail, e-mail and telephone calls. People are more likely to carefully consider messages which are appropriate to their needs as opposed to mass mailings.

You will likely be working closely with your venture capitalists for five years or longer. It is no wonder that venture capital firms are careful in selecting companies to fund. Entrepreneurs should be similarly careful in selecting a good fit with venture capitalists. Approaching every single venture capital firm may at first seem likely to increase your chances at success. In reality, however, a targeted approach which utilizes references and introductions is more likely to bear fruit.

There is no "magic number" of venture capital firms to target, but you may want to focus on between 5 and 15 firms initially and expand or refocus your search if you unable to obtain funding. Entrepreneurs should seek constructive advice from venture capital firms which choose not to invest. Often venture capital firms choosing not to invest can refer young companies to other, more appropriate funding sources.