O.K., by this point, if you’ve been a regular listener of For Starters, Robbie Allen might have convinced you to start a company—or at least given enough tips on a range of topics from crafting an origin story to knowing what to focus on when launching to prepare you if you do.
One key question now is whether or not to raise funding—and if yes, how to do it successfully. On this week’s episode , Allen talks to Jason Caplain, General Partner at Durham’s Bull City Venture Partners, about what kinds of companies should (and should not) raise venture capital and how his fund approaches investing in a company. Allen also talks to Alex Krawchick, the CEO of Greppys winner Klearly, who recently raised two rounds since founding Klearly in 2017, about his fundraising experience and what wisdom he has for entrepreneurs currently in the process.
Here are some of the episode’s highlights:
- Rather than the “spray and pray” approach some investment funds use where they invest in many companies and count on a few to bring home returns, Caplain said BCVP’s portfolios are usually relatively concentrated with about 12-14 companies. This allows the fund to dedicate more time to each company and build meaningful partnerships with founders. For Caplain, doing things like helping with recruiting and introducing founders to potential customers is what puts the “fun” in funding. (10:00)
- The best way to get noticed by BCVP amidst the ocean of entrepreneurs seeking venture capital is with a referral, whether that be through a well-known serial entrepreneur in the area (like Allen) or even through one of the companies BCVP invests in already if they use a potential company’s product or service. But, of course, Caplain said they still respond to emails coming in cold (29:10) .
- Until it’s a yes from an investor, it’s a no. But, don’t let that be discouraging: Caplain said one of BCVP’s biggest successes was investing in Synthematix, whose founder Robin Smith they initially passed on four times. (14:00) The key is building relationships with potential investors far in advance of when you are actually fundraising, and even when they say no, it’s crucial to periodically update them and maintain that rapport. As Krawchick says, “You want to connect dots and make lines out of them, it’s not just about one or two interactions over time.” (44:20)
- The term “product-market fit” is thrown around often, but Krawchick said an equally important term to know is “founder-market” fit, especially when fundraising. Entrepreneurs must have an unrelenting conviction and passion in their idea to be successful. As he puts it: “Investors and customers don’t want to see you walk away from something just because it gets hard. You have to be so passionate about what you’re trying to build that nothing can get in your way.” (54:10)
To hear more words of wisdom from an investor’s perspective as well as a founder’s perspective, listen to the full episode on Apple podcasts here: