From Ilan Goudsmit – Endeit Capital (@ilangoudsmit)
So you decided that venture capital is the right finance resource for your company. Before reaching out to a certain venture capital firm (VC), you should evaluate whether there could be a good match between your company and this particular VC. If you don’t do this, chances are you could be talking to the wrong VC’s and waste your (companies) precious time and energy.
Most VC’s have different key investment criteria for the investments they (are allowed to) make, such as company stage, investment size, geography and industry. How to know what the investment criteria are of a certain VC? A great way for you to view the investment criteria of multiple VC’s are online databases such as dealroom.co, Crunchbase, and for The Netherlands in particular, Dutchstartupdatabase.com. A lot VC’s also indicate most of these criteria on their website. If they don’t, you could tell perhaps by the investments they made.
Some VC’s only focus on certain company phases or revenue levels. Since there are in The Netherlands not so many VC funds investing at the stage where you still need to develop the minimum viable product (MVP), you have a much higher chance of financing the development of your first product with individuals such as friends, relations or entrepreneurs. These individuals are called “angels”. They finance the gap when you are ready for the venture capital stage. Most of the criteria I describe about which VC’s to approach in this blog post apply to angels as well.
Once you developed the MVP and have traction in users, you could start talking with certain (very) early stage venture capital firms that finance the first commercial operation to start generating your first revenues. Later on, once you start closing your first customer contracts and start generating revenue, other early stage investors could become relevant as well, since some only invest once you start generating revenue. Some VC’s use investment criteria such as monthly revenues of at least €1k, €10k or €50k etc.
Besides the criteria VC’s are using to judge you, you should apply the same to them, of course, if you are in the luxurious position to chooce between more than one VC. What kind of value added activities can the venture capital firm provide to you? Could they help you with operational and strategic improvements, mergers & acquisitions, or custom tailored financing? Do they help you with business development? Is their expertise, experience or network relevant for you? Are their (ex) portfolio companies relevant? How many hours per month will they schedule time for you? What is their track record? Are they able to sell your company? You could ask later during the negotiations with a VC for references with the founders of their portfolio companies.