Building an investor network from scratch sounds daunting. This is true particularly if, like many founders, you don’t happen to be part of a social or economic circle where striking up early conversations with potential investors is a no-brainer.
We recently sat down with three VCs who have also been founders to talk about different ways founders can approach this problem, how to land that first term sheet and what that term sheet should contain.
Today, we’re featuring the first part of that conversation. We spoke with investors James Norman of Black Operator Ventures, Mandela Schumacher-Hodge Dixon of AllRaise and Kevin Liu of both Techstars and Uncharted Ventures.
In part two, the investors cover more specifics about what to ask for in a term sheet and what to refuse.
(Editor’s note: This interview has been edited lightly for length and clarity.)
How do you start a network from zero?
James Norman: It’s pretty varied when you’re a first-time founder. Depending on what networks you come from, your situation can be different. Some people are able to start with friends-and-family money. For people in the demographic I invest in, it’s quite atypical for that to be a thing.
“If you have 50 conversations with investors, I’d say to think of the first 10 or 20 as practice.” Kevin Liu, director, Techstars
Getting to angel investors can be easier. If you’re not already in a network [that comes with] VCs and warm introductions and you want to get your initial capital from the best partners, angel investors can be a good place if you’re really early on and don’t have a product or you want to find someone who really believes in you.
If you do have something that’s working, and you really feel like you can scale this to be something very large, it’s okay to go and find a VC partner — someone like [the pre-seed stage fund] Precursor.
It all depends on your situation. You can go after VCs; some people [are open] to cold outreach if it’s cultivated in a thoughtful, meaningful way where it actually can be a connection.
Mandela Schumacher-Hodge Dixon: Success is planned, premeditated and on purpose. If you want to be successful at fundraising, you have to understand it is a game, and to win this game, you have to understand the rules, the culture, as well as the unwritten rules that you won’t read about in a blog post or hear in a podcast.
Be really clear about what you are building and if you are truly interested in making it “VC-backable.” Because when you make it “VC-backable,” you’re signing up to go as big and as fast as possible. You need to be aligned with the investors about the agreement they’ve made with their LPs on the returns they’re going to have for the fund. There was an agreement before you ever showed up to the pitch meeting.