Many years ago I was involved in a business targeting the shoe market. Through some connections I made, I was introduced to a potential investor. This investor was one of the original employees of L.A. Gear, a shoe company that at one point went public and was the third leading athletic shoe retailer behind Nike and Reebok.
Within 5 minutes of my conversation with him, one thing became extremely clear: this guy could give me a ton more value than just the dollars he could bring to the table.
He could tell me exactly how the industry worked. He could tell me what trade shows to attend and which to avoid. He could tell me which manufacturers to work with, and how to negotiate the best rates. He could introduce me to the best distributors to make sure my product reached as many retailers and customers as possible. And so on.
I tell you this because far too many entrepreneurs look at investors, particularly venture capitalists, solely as sources of cash. When it reality, many venture capitalists provide a ton more value than just the cash they offer. In fact, the right venture capitalist or VC is often the difference between your success or failure, or achieving minimal versus maximum success.
The three top areas where VCs often provide value include:
1. Contacts they have in their networks (these contacts can be for partners, employees, customers, distributors, vendors, etc.)
2. Advice in running your business, based on deep experience in your industry and in successfully growing and nurturing ventures
3. Contacts to additional sources of capital
Consider the following five VCs who are consistently ranked among the most respected VCs in the industry. Read their bios, and think about how their experiences and relationships could benefit your company.
Jim Breyer from Accel Partners. Jim Breyer is one of Facebook's earliest investors. He serves on the boards of Dell, Wal-Mart, and smaller ventures such as Etsy, Brightcove, ModelN, and Legendary Pictures. Jim also negotiated the sale of Marvel Entertainment to Disney for $4.3 billion and BBN Technologies to Raytheon for $350 million; and most recently closed two new venture capital funds in China.
Michael Moritz from Sequoia Capital. Michael Moritz was one of the early investors in Google, Yahoo, and PayPal. He invested in video camera maker Pure Digital (Flip Video cameras) which was later sold to Cisco for $590 million. He also invested and served on the board of Zappos. Michael has also invested in and sat on the boards of Earth Networks, Gamefly, Green Dot, Klarna, Kayak.com, LinkedIn, Sugar Inc and The Melt.
Brad Feld from Foundry Group and TechStars. You should know Brad's name as he's a frequent contributor to the Growing Your Empire newsletter. Brad's been an early stage investor and entrepreneur for over 20 years. Brad has invested in and/or sat on the boards of tons of companies including Abuzz, Anyday.com, Critical Path, Cyanea, Dante Group, DataPower, FeedBurner, Feld Group, Gist, Harmonix, NetGenesis, ServiceMagic, ServiceMetrics and Zynga. ALL of these companies have either gone public or been acquired.
Marc Andreessen from Andreessen Horowitz. Marc Andreessen co-founded Netscape, Opsware and Ning. He serves on the boards of Facebook, eBay, Skype and Hewlett-Packard. He made seed investments in Twitter and LinkedIn, and later stage investments in Groupon, Skype and Zynga.
John Doerr from Kleiner Perkins Caufield & Byers. John Doerr has made some of the best investments ever, investing early in Amazon, Netscape, Sun Microsystems and Google, where he currently sits on the board. He's also invested in online gaming firms such as Zynga and Ngmoco and clean tech firms such as Bloom Energy and OPower.
These 5 venture capitalists are clearly at the top of their game. But there are hundreds of others that could also provide tons of value to you. Look at the BILLIONS of dollars of value that these VCs created, by investing early in companies and helping them achieve massive success. And consider the vast number of connections these folks have, from investing in now ultra-successful entrepreneurs and sitting on boards along with other highly connected superstars.
Importantly, when seeking venture capital for your venture, find the venture capitalists that have the most relevant experience and contacts in your niche, that can thus add the most value to you.
Suggested Resource: In Venture Capital Pitch Formula, you'll learn exactly how to find and contact venture capitalists, exactly what information to include in your presentation, and how to secure your financing. This video explains more.