Building an investor network from scratch sounds daunting. This is especially true if, like many founders, you’re not part of a social or economic circle where it’s a good idea to strike up conversations with potential investors early on.
We recently spoke with three VCs who have also been founders to talk about different ways founders can approach this issue, how to bring in that first term sheet, and what that term sheet should contain.
Today we present 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 go into more detail about what to ask for in a term sheet and what to decline.
(Editor’s note: This interview has been slightly edited for length and clarity.)
How do you start a network from scratch?
James Norman: It’s quite varied when you’re a first-time founder. Depending on which networks you come from, your situation may differ. Some people can start with money from friends and family. For people in the demographic that I invest in, it’s kind of atypical for that to be a thing.
“If you have 50 investor calls, I’d say consider the first 10 or 20 as practice.” Kevin Liu, Director, Techstars
Reaching angel investors can be easier. If you don’t have a network yet [that comes with] VCs and warm introductions and you want to get your seed capital from the best partners, angel investors can be a good place if you are very early and don’t have a product or you want to find someone who really believes in you.
like you doing have something that works, and you really feel like you can scale this up to something really big, it’s fine to 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 cultivated in a thoughtful, meaningful way where it can actually be a connection.
Mandela Schumacher-Hodge Dixon: Success is planned, premeditated and on purpose. If you want to be successful in fundraising you have to understand that it is a game, and to win this game you have to understand the rules, the culture and the unwritten rules that you won’t read about in a blog post or hear in a podcast .
Be very clear about what you are building and if you are really interested in making it “VC backable”. Because when you make it VC-backable, you’re signing up to go as big and fast as possible. You need to be in line with the investors about the agreement they’ve made with their LPs about the returns they’ll make for the fund. There was an agreement before you ever showed up at the pitch meeting.