281+ Venture Capital Firms

• Pre-seed
• Seed
• Series A - D
• Late stage (Series D - IPO)

Receiving funding from a venture capital firm

There are stories of millions being exchanged based on “back of a napkin calculations” or cheques literally being thrown at startups after Y combinator demo days. And this does happen, especially if you are well connected. But most of the time, venture capital reality is a much more structured process.

The VC investment process has 6 main steps:

Step 1 - Sourcing

Venture capital firms gain access to business projects via accelerators, incubators, universities, angel networks, personal intros and founders that get in contact directly.

It’s important to get on the VCs radar by as many of these entry points as possible. And this venture capital database is a great starting point.

Step 2 - Deal screening

If your business fits within the venture capital firm’s selection criterias, you will be asked to an initial meeting. At this stage, and without a strong introduction, your answers are simply going to be checking off boxes for the VC. Market, revenu, product stage, founders, deal size etc.

There may be a 2 step deal screening, where you will be mostly answering the same questions again but to a higher ranked individual from the company.

Step 3 - Partners review

After a few back and forths, your lead contact during the deal screening will present your business at the partners review meeting. This is now out of your hands.

Step 4 - Due diligence

This step varies between venture capital firms, but generally, the larger the amounts the more intense the due diligence. This is about assessing the risk of the investment.

If you already have a lead investor on board, they may be responsible for the due dil and other VCs may just tag along. Especially for early stage deals.

Step 5 - Investment committee

Depending on the size of the fund, this can be a 1 to 1 meeting or a full on round table with all partners present. If you are here, you have passed all of the nitty gritty tests. This stage is generally a mix of due diligence feedback and high level questions with partners and general partners.

Step 6 - Closing the deal

Once the decision has been made, your lead contact will send you the offer. This can be as simple as a yes to all previously detailed terms or an offer that can be negotiated. It can also be a partial deal depending on XY&Z happening (for example, another fund must say yes).

Conclusion

The venture capital process is a long journey with drop offs at every stage. The good news is that the process is quite similar from one fund to the next, so it does get easier. Your answers and documents will be ready and stress levels will drop dramatically with each new meeting. Fundraising is definitely a skill. If you multiply the reps, you will get better.

The key here is to start talking to venture capital investors as early as possible and build trusted long term relationships that will help your business grow.

Why do founders need angel networks?

Yes, there are thousands of wealthy individuals looking to invest in startups. But how do you even start by narrowing down the field? And when you do, why would a busy investor have the time to listen to you exactly at the moment when you decide to contact them?

But let’s be positive for a moment. Let's imagine that you do find the perfect investor. Congrats! You have found somebody that trusts you and has experience and contacts in the field you’re looking for…

...but what makes you think this person knows how to structure a startup investment? Who will negotiate the term sheet? Will they be able to help you on further investment rounds?

Why do angel investors need angel networks?

Angel networks solve a lot of the above issues. They will have processes in place to filter deals and hold pitch events. And they will already have the structure ready to quickly invest into startups as lead investors or addon partners.

Members of these groups are often founders themselves and have had successful exits in the past. It’s like having access to tens of advisors that all have your interest at hand, for free.

And finally, it’s not rare to see members being part of several syndicates or other types of venture capital groups. This is a great way to be introduced to further investors. It’s a more diverse group than a venture capital firm, so it’s not all about the money.

The most famous accelerator is Ycombinator in the US. They have had great success with previous graduates such as Airbnb, Dropbox or Stripe. Every year the number of applicants has been growing and made it very difficult to get accepted. But there are lots of other accelerators that can help you grow your startup.

In the UK, we mainly see 3 types of accelerators: corporate accelerators, university based accelerators and startup studios / incubators.

Corporate accelerators

Corporate accelerators are backed by large organisations that are using the structure to nurture fast moving teams that are a lot more agile than themselves. These accelerators are often narrowed down by sector so your startup will need to match the required criterias.

Once you get in, you’ll get an extra boost to your startup with easy reach to partnerships with the organisers. This can be extremely handy in compliance heavy sectors such as fintech.

University based accelerators

These accelerators are created to entertain eco-systems and grow innovation parks. Budgets are granted every year to make a link between academic research and the business world. This effort has become very powerful recently in the healthtech/biotech space but also throughout industry type businesses.

We’ve also seen great partnerships come out in anything to do with energy.

Startup studios

Startup studios (business incubators) also help you grow your business but will be a lot more hands-on. Often set up by previous founders, these studios will share services across all of their investments (think accounting and HR). It’s not rare to see studios come in as equal partners or more. Studios are often cross-sector but with a common business model such as SAAS products or marketplaces.