VC’s approach company or Company approaches VC’s. Often this starts with an associate at the VC firm pinging the entrepreneur. That’s their job, to build deal pipeline, evaluate companies, and then hopefully engage a partner when they find something interesting.
VC’s ask company to send over a deck by email.
VC’s invite company to pitch at the VC’s offices.
Company presents the deck on the company: vision, market, strategy, progress to-date, plan. It’s mostly high level stuff at first.
VC’s ask questions.
VC considers next steps.
If no, company never hears from VC again.
If yes, interest, company is asked to come visit again and educate more partners.
If yes, interest, company is asked to provide a data dump of financials, models, projections, etc. An analyst or associate at the VC firm digs in to study the models, poke holes, challenge.
If yes, interest, company is asked to spend many more hours discussing models, providing further analysis.
If yes, interest, company meets with the entire partnership.
Final Yes / No decision.
Now, imagine doing that same process simultaneously with 3 firms for 6 firms or 10 even. The whole process can take A LOT of time and brainpower that otherwise could be spent running the business. The worst part of it is going on a lot of first dates, and then second dates, before really diving into the details that really make up the business.
Many articles lately mentioned Kauffman report as a source for evaluating Venture Capital returns and concluding underperformance in relation to public markets and index returns. You can read the report by following the link.