The Three Stages of Venture Capital: Sourcing, Validating, Following

The business of venture capital has three primary phases for investment.  Sourcing the deals, validating the company, and after investment following the company.

SOURCING

KEY CHARACTERISTICS

Integrity | Personality | Passion | Persistence | Business Judgment | Financial Sophistication | Creativity

To create and maintain valuable contacts you must be liked, knowledgeable, and trustworthy.

GEOGRAPHY

Arizona | Nevada | Colorado | Utah | S. California | Georgia | N. Carolina | Washington DC | New Mexico | Texas

Look for value in growing markets, but don’t ignore traditional markets.

PEOPLE

Leverage personal and professional relationships | Establish connections with active members of tech communities | Utilize TWC Portfolio Companies and EIRs for introductions | Talk with other Seed and Series A VCs
Maintain regular dialogue with key sources, ask for introductions, and utilize multiple mediums of communication.

PRESENCE | NETWORKING

Attend startup, tech, and VC events | Participate in startup/VC competitions | Organize events | Impart knowledge and give back

Be present, active, visible, and participate in the Entrepreneurial Ecosystem.

MARKETING

Social Media presence | Develop relationships with journalists | Website with resources for entrepreneurs | White Papers | Regular blog content

Keep yourself in peoples minds and establish yourself as a thought leader.

VALIDATING

EXPERIENCE

Knowledge | Experience | Informed | Inquisitive | Aware | Gut Feeling

Utilize experience and knowledge to quickly assess potential.

RUBRIC

Market Validation & Analysis | Industry Attractiveness | Product & Solution | Business Model | Risk vs. Talent |

Presentation Quality | Funding Readiness | The Ask

Create a rubric to score potential companies that pass initial review.

REPORTING

Regular prospect reports for Investment Committee | Standardized report format |

Create a standard easy to digest prospect report for committee feedback.

MEETINGS

Meet with prospective companies | Talk to Founders, Management, Advisors, and Staff |

Face time with people is the most important step.  Get to know and understand the people.

DUE DILIGENCE

Reference Calls | Interviews | Research Competitors | Analyze Financials | Question Assumptions

Question everything.  Check facts and figures. Play the devil’s advocate.

FOLLOWING

COMMUNICATION

In Person | Email | Phone Calls

Maintain regular communication to understand company’s needs, hurdles, and risks.

MENTOR

Knowledge | Insight | Introductions | Support

Teach what you know and learn from your talent.  Get your hands dirty.

METRICS

Data | Analysis | Goals | Milestones

Create company specific metrics for measuring success.  Check and update them regularly.