How to find the right VCs, and approach them in order to raise funding?

Question

Hi all,
I'm starting to plan our first funding round, however I have not had any exposure so far in this process. So I'd welcome any advices/suggestions on the topic.

I always imagined I'd join one of the many startup pitching events which used to take place in London, however they are none at the moment due to Covid.

Some of the questions I'm looking to answer are:
- How would I find a list of VC funds in order to drill down which VCs are looking to invest in my sector?
- After I make a shortlist of VCs whose criteria I fit, what is the best way to approach them?
     - Should the pitch be in the first email?
     - Should I try to schedule a call first?
-After that initial connection, what does the process look like? And how long would you say it takes?

Would appreciate some light on this topic. 
Thanks in advance,
Atanas

Matthew Johnson · Accepted Answer

In my experience, those pitching events are an enormous waste of time, and very few investors are there (and if they are you still have a very low likelihood of success).

The steps I would take:
- Get access to Dealroom https://dealroom.co/ -> it covers the European VC market pretty well (if you are US based then Crunchbase is better). Dealroom partnered with Technation on a free version with a matching tool here: https://datacommons.technation.io/intro
- Run your search on investors who have invested both in your space, and at the stage you are at. Ignore later stage funds for now.
- The first interaction with them ideally comes from a warm intro. Find the partner or investor you want to connect with, and see if you have any mutual connections on LinkedIn - if you have a mutual connection with a founder they've backed, that's a great way to get an intro because obviously they trust that founder.
- If you have the luxury of time, the first interaction ideally isn't because you are fundraising. Instead, try to get an intro and ask for feedback on what you're working on. This changes the dynamic a bit so that you aren't right away asking for money for someone you've never met. Instead, you are looking to learn. If you can build a bunch of warm relationships with prospective investors early in a non-fundraising dynamic, it makes it easy to reach back out to a warm relationship once you are fundraising. Obviously this is time consuming, and not everyone has this luxury but it makes things easier.
- Once you do have that fundraising call, early stage deals can happen pretty quickly if the investor likes you. Generally they'll run it by their team, and get back to you within a week or two. Then you'd have a second meeting, maybe a third, and then DD. Funds try to get through these stages pretty quickly (although in the UK and Europe this is generally a bit slower than the US). It can be a few weeks, or a few months from meeting to funds in your bank account.
- The hardest part is really getting the first person to commit. Often investors will ask you to keep them updated, or they'll say they want to see more revenue or traction or whatever else so you should reconnect. It's all a bit nebulous until you have a term sheet, and then you can go back to everyone else you've talked to and let them know you have a lead investor or commitment.

Hope that's helpful. We just did a list of active pre-seed funds here if helpful: https://taskablehq.com/blog/active-pre-seed-investors-a-definitive-list

How to find the right VCs, and approach them in order to raise funding?

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