

With the incessant talk about unicorns, it’s easy to lose sight of the opposite end of the investment funnel. What feeds the industry is not unicorns, but first venture round companies.
Yet raising investments from institutional venture capitalists is becoming increasingly difficult for early-stage entrepreneurs — and it likely won’t ease up through the remainder of 2016.
There are three “best times” to raise capital in a calendar year: January through March, May and June, and mid-September through mid-November. You’ll be hard pressed to find many VCs making investment decisions mid-July through August this summer. Plus, given 2015’s Q2 and Q3 peak, and then the Q4 slowdown into Q1 of this year, many previously funded companies, including the unicorns, will come to market again in September 2016.
September-November 2016 will be the absolute worst time to be raising capital for a company at any stage. Not only will the masses be going to market then, but we’ll be seeing the final chapter of the U.S. presidential race play out — which, historically, has been a distraction for private and public markets.
As a venture capitalist for the last 18 years, and an entrepreneur prior to that, I’ve seen what’s worked well and what hasn’t when it comes to raising money. A necessary part of it, of course, is the science: evaluating the market opportunity and team, establishing a fair valuation, getting comfortable with this being an opportunity that can scale successfully to a valuable outcome. But the heart of successful fundraising is relationships.
I learned very early on in this business the value of building open dialogue and authentic relationships. From my position as a VC — and often a company’s first VC board member — I only wield a certain amount of influence. I am a thought-partner, a mentor, a connector — never a boss. Founders and CEOs of our portfolio companies listen to me, but they don’t have to do what I say. When entrepreneurs understand that approach, it sparks an essential bond at the start of a relationship. Like all good relationships, the partnership formed early on with your investor will have good times and tough times — but if it’s the right partnership, it will be one built on trust, respect and transparency.
Some of the best relationships may not start as a pitch. I’m reminded of Skyward’s Jonathan Evans, whose casual coffee with one of our partners turned into a pitch, an investment and a promising long-term partnership.
Granted, the experience that Jonathan had certainly won’t be every entrepreneur’s reality. Jesse Proudman, founder of Blue Box and now CTO of IBM Blue Box, can testify to that. He says he will never forget his first meeting with Voyager. He got a “no,” but it wasn’t a traditional rejection — we gave him clear feedback as to why we were not going to invest at that point in time. We told him we liked his energy, but he needed a stronger team, more revenue and a clear product story.
Jesse regrouped for the next year, worked on what we discussed, including hiring an executive leadership team with experience in VC-based startups, and came back to us with a vastly improved business plan. Jesse was tenacious and focused. We led his A round and actively participated through their exit to IBM. And it was a win-win for all of us.
For effective relationship building, resist the temptation to cast too wide a net. An entrepreneur who speaks with 20 or 30 VCs right at the start hasn’t done his homework and risks looking like a rookie. You’re not going to shop on Tinder if you want to make a real connection. The same goes for fundraising: approaching VC partnerships as you would a hook-up on Tinder will get you nowhere fast.
You’d think that we all know this intuitively, but too often, I see entrepreneurs give potential investors the impression of being heavily shopped. Don’t do it. Instead, narrowing the focus — approaching no more than five VCs at a time for a particular round — will produce a better outcome.
Also, though it may sound counter-intuitive, start raising capital for your next round during your current round by meeting with other VCs who may not be interested until the next raise. It’s never too early to start developing relationships that will pay off in subsequent rounds of capital.
For instance, when we syndicated the Series A round for Elemental Technologies back in May 2008, the company strategically approached five firms that offered the right mix of geographic diversity and domain expertise in the niche of commercial video infrastructure. Of those original five VCs, one co-invested with Voyager in the Series A round, another one led the Series B round and a third led the Series C round. Those relationships built in 2008 and nurtured throughout their growth continually paid off at each stage of the company’s funding requirements, right up to their exit to Amazon last year.
Like Glengarry Glen Ross and the phrase we all know well — “Always be closing.” Always be fundraising. As a VC, I never stop fundraising, either. And like our portfolio companies, I live by relationships.
