How to Build a Relationship With the Right VC Partner while Focusing on Your Business
CEOs of expansion stage businesses are flooded with emails from VCs. On one hand, it feels convenient but short-sighted to ignore all of them, as there may come a day when VCs will serve as helpful resources. But if a CEO took a call with every VC who reached out, they’d be missing their (and, frankly, the VC’s) most important priority: the business. So what’s the right balance that results in relationship building that will be fruitful down the line while keeping both eyes on the ball?
Only talk to firms that are a good fit for the business you’re building and can deliver on your needs.
Not all VCs are created equal. As a baseline, you can cut out VCs that aren’t willing to invest at your stage (i.e. whatever round you’re looking to raise next) and sector (e.g. B2B software, consumer internet, hardware, biotech, etc). Then, ask yourself what you’re looking for in a partner, and only talk to potential VC firms that fit the bill. If you’re excited about bringing an active partner around the table to help with operational support, don’t talk to passive investors. If domain expertise is important to you, don’t talk to generalists. There’s no one “right” answer as to what makes the perfect VC partner…it depends on your preference, so laying out your criteria upfront will help you get clarity on who it makes sense to entertain.
Set aside a certain amount of time on a monthly or quarterly basis to spend with VCs.
Even once you’ve determined your criteria, it’s easy to get carried away spending time with every VC who might fit the bill or getting to know VCs deeply who may be your future partners. Kissing a lot of frogs is healthy as is dating before you get married, but to help prioritize networking with VCs, it’s helpful to time-bound it either monthly or quarterly. As a rule of thumb, I’ve heard CEOs feel good about setting aside a handful of hours each month to spend getting to know potential partners. By time boxing, you’ll naturally force yourself to be deliberate about who you prioritize.
Look out for VCs for whom you’re a priority.
So you’ve narrowed down folks who invest in your stage and sector and meet your needs (on the surface, at least). How do you continue to whittle down the list? There are some telltale signs that you’re a priority for a VC which indicate that they’re likely to want to work with you if you choose to work with them:
- Are they trying to meet you in person?
- Do their emails and/or calls demonstrate a clear understanding of what you do and the market you’re in?
- Are they offering to help with recruiting, customer intros, or other operational needs rather than just hounding you with questions?
- Did they care enough to ask someone in your mutual network for an introduction?
If the answer to some or all of these is yes, it’s likely you’re a priority for them, and granted they also fit your VC criteria, it’s probably worth at least a first meeting.
Ask portfolio CEOs what they think of the VC.
VCs ask around about companies, so there’s no reason why CEOs shouldn’t ask around about VCs. A VC’s reputation with its portfolio CEOs is perhaps the most telling information you can gather, so once you’ve narrowed your list of potential VCs down to those that fit your criteria and for whom you’re a priority, it’s worth doing some reference checks.
Spend time with people who you could see yourself calling when you need help or advice.
Choosing a VC is like getting married. If you look yourself in the mirror and ask yourself who you could see yourself calling when things get tough, that should help you get to your core set of potential partners.
At the end of the day, building relationships with VCs is part of the job of a venture-backed (or future venture-backed) company’s CEO. But being smart about who you spend time with helps maximize the long-term outputs and keep you focused on building a great business.
Use this as a guide for controlling costs, getting to cash-flow positive and extending your runway as quickly as possible.
Companyon Ventures enhanced our Expansion SaaS Benchmarks Data Explorer by building the accompanying SaaS Benchmarks Modeling Tool to measure the current and projected performance of their portfolio against other high-performing SaaS startups. Check out the tool here.