Raising venture capital is tough for any startup. But it can be a little more difficult when you’re located outside of Silicon Valley. More difficult, but definitely not impossible.
My software company, Pendo*, is based in North Carolina’s Research Triangle, and we just completed a $20 million Series B round led by Spark Capital, with participation from all our existing investors, including Battery Ventures, Core Capital, Contour Venture Partners, IDEA Fund Partners and Salesforce Ventures. Here are five takeaways from our process that might be helpful to other startups not located a stone’s throw from Sand Hill Road.
Invest in customer relationships
This is good, general advice for building a great company — it’s one of our company’s core values — and it’ll help your fundraising efforts, too. Happy customers are your best salespeople, and their voices can be particularly helpful when you’re looking for funding but are not well-networked in the VC community.
Ultimately, VCs are looking for companies whose products alleviate pain for customers, aren’t easily replaced and present great upsell opportunities. Every VC you meet will ask you for customer references. You’ll pick your four best customers who will say great stuff — and then the VC calls blind references, looking for the real scoop. Once, I accidentally dropped the name of a prospect during a VC meeting. That probably wasn’t smart, as we hadn’t closed the deal yet. But when the prospect let me know the VC wanted to talk about us, I told him to go ahead. I knew we’d treated him well, and the gamble ultimately paid off. Aim to make every customer — and prospective customer — supremely happy, and they’ll sing your praises when asked.
Build VC relationships over time
This is also good advice for anyone, but particularly if you’re in Raleigh, Atlanta, Chicago or some other non-California tech center and don’t have lots of connections in this world. Think long term, spend some time doing research and ask around to find the best potential partners.
One easy tip: Look at the firms backing the companies you admire. (Crunchbase is a great resource for this intel.) See who’s active in your space and who might be interested in diving in. (Mattermark Daily and CB Insights both offer free newsletters, for instance.) Look at what stage investors typically invest and make sure it lines up with your objectives. Figure out why these people should meet with you, whether you already have a warm connection or if it’s a cold outreach.
Aim to meet with people informally for several months before you start formally fundraising. Ask for 20 minutes of their time to share what you’re up to. Keep it friendly, confident and to the point. Repeat as necessary. Remember: Adding a VC to your company (and partner to your board) is a really big deal and (if you’re lucky enough to have options), you should be super thoughtful in your evaluation (more on this below). It’s like getting married, but harder to undo.
With our Series A, we wanted a B2B software-as-a-service (SaaS) specialist from a big firm, and we got that with Neeraj Agarwal. For our Series B, we wanted to complement our team with an operator who really understands our big vision. Megan Quinn’s background in product management at leading organizations — some with a consumer bent — makes her a great fit.
Get out of the building and take every meeting
If you’re not based in the Bay Area, find reasons to go there. Take every meeting you can get, even if it’s a brief chat with a lesser-known firm or a junior associate (assuming they seem thoughtful).
Humility is really important to this process: You never know who’ll be helpful. I had one meeting with a VC who spent the first 20 minutes talking about the completely wrong business. He’d gotten us confused with another company. Not an auspicious beginning — but he ended up investing once he figured out what we actually did!
Do what’s necessary to connect with as many people as possible. The occasional white lie won’t hurt, either — it’s OK to say you’ll be in town and would love to grab coffee, even if the only reason you’re in town is to get coffee with them.
Get as much face time as possible — but also take note of who’s willing to come to you. As your relationships with VC firms develop, notice who delays visiting you or complains about the long flight. These little things signal whether a person is really committed to investing in your company or simply kicking the tires. I remember one VC who came out to our offices and made a point of mentioning how many direct flights there are between SFO and RDU daily and emphasized he thought it was an easier commute than a much closer major hub. He became an investor, too. Ultimately, you want to work with VCs who genuinely want to work with you. An enthusiastic visit is a sign of real interest.
But keep in mind: Informally, you’re always fundraising. Silicon Valley is a small world. Word gets around. Make sure that you’re carefully controlling the information flow. Share numbers selectively, and focus on telling your story and making connections.
Tell a big story — and execute
The critique you’ll sometimes hear about companies located outside the Bay Area is that we don’t “dream big” or “aim for the fences.” So if you do want to scale into a large company, and you need capital to achieve that growth, you must articulate how it’s possible and demonstrate the ambition to realize it. This is about setting aggressive goals and then working hard to gain proof points. Do you have an aspirational customer that demonstrates the future? Work hard to close one or two. Do you have a hot-shot employee that you want to close that demonstrates your ability to hire a great team? Work hard and hire that person. Telling a big story is less about the telling and more about the belief that you can truly create a big company — and executing on it.
Find the right match
It’s hard to play it cool when you’re asking for millions of dollars. But it’s crucial not to forget that you’re actually looking for partners, not buyers. If a VC isn’t fired up about your business, move on. Some investors will only invest within certain (often nearby) geographies; I’ve personally been asked countless times by investors if I’d be open to moving. Some just won’t be convinced by your story. That’s OK — accept that they’re not the firm for you and keep looking. Eventually you’ll find VCs who understand your model and believe in your vision.
If you’re lucky enough to feel momentum building among interested parties, pay attention to that. You might think you’re on a slower funding timetable, but you also want to be ready to move forward when the right investors are ready. Be prepared to accelerate if necessary, but keep a cool head if you do. The wrong VCs will rush you; the right ones may express urgency but want a solid, mutual match as much as you do.
Raising millions of dollars can be daunting. But like any form of selling, it’s about building relationships, doing right by those people and staying confident that finding that great fit benefits everyone. That takes time. And like any relationship, partnerships with VCs have to be built on authenticity. You can’t force it — you just have to keep looking until you find the right one.
This post originally appeared on TechCrunch.
*Denotes a Battery investment. See here for Battery’s full list of all investments and exits.