Capitalizing on Connections: A VC's Guide to Effective Networking and Fundraising
In VC Lab's Cohort 9, I joined an impressive group of professional athletes, agents, tech giants, conference organizers, and politicians, all dedicated to creating venture funds reflective of their life's passions. I consider my admission a clerical error for which I will be forever grateful.
The curriculum stands out for its practical focus over academic theory, aimed at the real-time creation of lasting venture firms, incorporating hands-on exercises designed to maximize your potential.
The true test arose when presenting your thesis and soliciting funds, requiring the conversion of existing relationships into investor commitments and evolving the nature of these interactions from friendly rapport to professional, fiduciary relationships.
Not everyone could do it well. Attrition reached 75%, unexpectedly impacting individuals whom I never imagined, in my wildest dreams, would struggle to secure a commitment.
VC Lab's curriculum offered a clear execution plan, but it often pushed participants beyond their comfort zone, challenged their relationship-building skills, or exceeded their network's funding capabilities.
Emphasizing the adage "you can't be what you can't see," VC Lab provided exposure to successful figures who imparted wisdom on networking's significance and the necessity of consistent interaction to foster and sustain these vital connections.
Ihar Mahaniok of Geek Ventures, a favorite speaker of our cohort and fellow VC Lab graduate, excelled in fundraising through his thoughtful and disciplined approach, beautifully articulating the keys to his success so effectively that he has become a go-to reference for fundraising best practices in our discussions.
Regularly featured to speak to our cohort and others, Ihar's keynote at last week's Decile Summit was exceptional, offering profound perspectives in just 20 minutes. Below are the top 10 points where Ihar's insights were particularly striking.
Track Record: Emphasize your track record in investing, such as TVPI (Total Value to Paid-In) and DPI (Distributions to Paid-In), on your angel investments or VC deals and why you made the decisions you did with context.
Strategy and Unique Value Proposition: Clearly define your investment strategy and what makes it unique, like focusing on a specific sector or startup type. Clarity on this is important to stay memorable.
Deal Flow and Network: Highlight the uniqueness of your deal flow and the strength of your network, showcasing how this gives you access to high-quality investment opportunities.
Warehouse Deals: Use warehouse deals (investments you've made recently as an angel and now bring into the fund) to demonstrate active and relevant deal flow.
Networking Skills: Networking is essential in venture capital, both for fundraising and finding investments, requiring a sociable nature and dedication to building and nurturing relationships for success. You have to do it so you might as well like it!
Activating Your Network: Leverage your existing network, especially those you've known for a long time, as they're more likely to trust and invest with you.
Continuous Fundraising: Engage in continuous fundraising efforts without taking breaks, as market conditions can change rapidly.
LP Engagement: To enhance the likelihood of securing investments, it's crucial to interact with numerous potential Limited Partners (LPs) and maintain steady follow-ups and communication. He referred to a scenario where someone was discouraged by their inability to close a fund after only 35 pitches to LPs, advising that the aim should be several hundred, even up to 1000 pitch meetings. This process can extend over years because each pitch might involve two to three meetings.
LP Persona Development: Understand and target the right LP personas, such as tech professionals from big companies who might be interested in VC as an asset class but are not professional investors.
Post-First Close Strategy: After your first funding close, keep improving your story with new deals and developments in your portfolio, and regularly communicate these updates to potential and existing LPs.
Ihar demonstrates wonderfully how openly sharing your journey and engaging others can effectively create and strengthen a community.