||Trading Your Job
For Venture Funding
By Nick Corcodilos
Everyone who has ever worked in Silicon Valley has considered chucking it all to start a
business. The serious contenders know they will likely need venture capital to get their ideas off the ground. Let's consider
some basic issues about trading your W-2 for venture funding.
The capital isn't where you think.
People who are just starting out make the mistake of seeking funding in the wrong places. Part of the problem is
that there's too much published about "how to get funding". It's kind of like job hunting: people follow the
"published rules", and all that gets them is a place in someone's circular file.
In fact, most venture funding is allocated not based on traditional presentations, but on
personal contacts. Just as important, most venture funding comes not from big venture capital (VC) firms, but from small, local,
almost informal funding sources.
CYA: Keep it confidential.
The fact that most funding comes from quiet, low-profile sources actually bodes well for you if you currently have
a regular job. You need utter confidentiality while you are planning your move and the quiet, personal approach is more likely
to help you keep it confidential. Any effort to hit as many big VC's as you can by merely distributing your plan is likely to
get you into trouble. You never know if a venture firm is going to inadvertently share your plan with someone who has loads of
cash to invest – and who happens to sit on your employer's board
Invest in a support team.
If you think your plan is good enough to present to venture capitalists, it's worth spending a few bucks to get it
vetted by an attorney and a CPA. Start by retaining a good lawyer, preferably one with experience in both employment contract
law and new ventures. You need to know what your current employment contract allows and what it doesn't. You also need a rapid
response capability in case your employer gets wind of what you're doing and fires off a threatening letter to you.
When you're embarking on this kind of adventure, you need the right kinds of back-up. Serious
VC's will respect you for it.
Develop the necessary contacts.
Next, you need to devote a lot of time to making contact with potential venture sources. Critical at this juncture
is that you forget about your business plan for the time being. Just focus on identifying the people who might be able to
provide funding. You'll find them by talking to the people who do business with them:
- Real estate brokers
- Owners of other small businesses
- Local chambers of commerce
The best way to approach a VC is through an introduction by someone who knows him. The
intermediary will tell you how the VC likes to be pitched.
Study your targets.
Don't go pitching your plan to anyone until you've studied the potential available sources of funding. What kinds
of deals have they funded? What are their hot buttons? How do they handle both successful and unsuccessful investments? Who have
they worked with? Whom do they know?
You need to work backwards on the "who" questions: once you've established who they
work with, go talk to those people first, to establish a "reverse link". Then, when you finally make your approach,
you'll have a name to drop or a referral to lean on. Anyone who's going to cough up bucks responds better when they know you
know people they know.
Learn to win when you lose.
In keeping with the focus on building relationships, bear in mind that being turned down can pay off, too. If a
particular target rejects you, make sure you've cultivated the kind of relationship that will increase the likelihood he'll
refer you to yet another potential source of capital. VC's all know one another - once you're inside the circle, it's much
easier to move around among them.
Finally, don't quit your day job. Not until you've got a check in your hand.
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