Selecting venture capital firms for your startup is one of the very important tasks. It is critical to research the venture capital firms that are focused on your needs before you contact them.
Venture capital firms have evaluation criteria for startups. As a part of your research into specific firms; learn their sector foci and their evaluation criteria. What stages do they invest in? Only contact VCs that are interested in what you offer. Learn whether they have invested in direct competitors. Understand the pros and cons of other forms of financing. What fits best for your investment strategy and exit strategy?
Experience in your space
During your research learn which venture capital firms have experience in your target market and in your type of offering. Are they successful in their investments in your space?
How do they assist startups
Do they build two-way relationships? Do you want to build a long term relationship with this specific person? A key question is; how does the partner in the VC firm help a portfolio company when it has a difficult period?
Talk with startup CEOs funded by VC firms that interest you. Also talk with accountants, lawyers, and bankers. Ask how the VC firm interacts with its portfolio companies. What do they really do that helps them beyond just cash? How well do they communicate?
Understand the VC firm’s assets and the stage in the fund life cycle. You do not want an investment from a fund that is about to close down as it nears its end-of-life.
Does the partner have the experience to understand your space. And the need for and timing of funding for startups in your sector?
Many financial venture capital firms invest only in specific geographic areas. Strategic venture capital funds are much more likely to travel worldwide.
Selecting venture capital firms for your startup is hard work. Do it carefully. And always have more than one investor.