There have been a lot of recent conversations in the blogosphere around whether or not it is productive to pitch to associates when raising venture capital. Most of the views have focused on early stage investing so I wanted to provide a perspective on interacting with early growth equity firms such as Volition.
Let me start with my conclusion: Entrepreneurs and founders looking to raise growth equity shouldn’t hesitate for a minute to engage with associates.
Now let me explain why I believe this to be true:
- The interest level of a growth equity deal is not measured by its deal source. Great companies and contacts come from many sources and we respect and encourage all of them. Clearly some mediums are more effective than others (e.g. bankers who understand our investment focus versus mass emails) but who within our firm actually spoke to the company first never enters into the equation.
- Every investment professional within our firm is responsible for interacting with founders and entrepreneurs. The entire team meets on Mondays to discuss interesting companies/ people we interacted with that fit our investment focus. The discussion revolves around the company’s value proposition, brainstorming around how Volition can best add value and what actionable next steps are appropriate. “Non-partners” are involved in these discussions as much as partners. In fact, in many cases, it is thanks to the efforts and insights from the “non-partners” that these companies become known.
- Associates are very aware of – and have a great appreciation for – what deal team would be the best to explore a potential partnership. Because they interact with the partners on a daily basis, they appreciate particular areas of passion and can provide invaluable advice on how best to present to the partner. As they taught me in consulting, “knowing your audience” is a key ingredient of a successful presentation. Associates “know the audience” cold.
- Associates have a network of contacts at other firms. And they are social. It is not uncommon for the following conversation to occur:
Associate at Firm A: “So what areas are you looking at these days?”
Associate at Firm B: “I’ve been spending a lot of time looking at data services businesses.”
Associate at Firm A: “Cool – that’s a great space. You should check out Company X. It doesn’t fit in our investment profile, but it’s a great company.”
My opinion is clearly colored by the way we are structured at Volition. We are a small, cohesive and collaborative team aligned around the common goal of identifying and partnering with great founders to build market leaders. As such, before entrepreneurs categorically dismiss interacting with associates, I would encourage them to dig a little deeper on the culture and structure of the firm.