A majority of the advice aimed at helping startups manage relationships with venture capitalists is tailored for when that startup is raising or has raised funding. Certainly a lot of the interaction between startups and investors takes place during and after financing rounds, but there is a lot entrepreneurs can be doing before they seek funding to set themselves up for success with VCs. In a response to a question on the Q&A site Quora, VC Mark Suster offered his advice to entrepreneurs on how to manage relationships with VCs before fundraising begins.
“Spending (small amounts) of time now will pay dividends later when (if) you actually do need money.”
– Mark Suster
Suster’s first point is to pick and choose which VCs you decide to build a relationship with very carefully. There’s no point in spending time on a relationship with a VC who is irrelevant to your product sector or who you can’t imagine actually working with in the future (for any reason). It’s a lot like dating when you think about it – if you’re seriously looking to meet your future spouse, why waste time dating someone you’d never consider marrying?
“Don’t come to a VC when you need money,” says Suster. After all, you need to get to know the person you’re going to marry before you get engaged. “It’s too hard for them to assess your character in a short period of time (and vice versa) and it’s too hard for them to see how your thinking, product & traction develop over time.”
Another point Suster makes is that you want to build a relationship with a VC that is not “a yes man.” Just as with relationships of the heart, being continually told what you want to hear does not a healthy bond make. VCs should be constructively skeptical and constantly challenging and questioning your every move – pushing your startup to grow.
While a startup is prone to spend much of its early time worrying about its product and its customers (as it should), Suster says that “spending (small amounts) of time now will pay dividends later when (if) you actually do need money.” He advises newborn startups to make sure the VCs they engage are aware they aren’t looking for funding at the moment, and to keep things casual – no formal pitches.
Communication at the onset of a VC/startup relationship is just as important as it is with a romantic relationship. Each party needs to know what they are getting into, and that they’re on the same page. It may be more efficient to build up that relationship slowly through a series of small casual coffee dates rather than jumping in head-first with a full-blown steak-dinner-carriage-ride-through-Central-Park date.
“Once you’ve pitched and been turned down it is incredibly hard to re-engage that VC,” says Suster.
