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June 8th, 2006:

To the sender of an unsolicited business plan email

2006-06-08 Randall Lucas Hello, I received an unsolicited business plan via email from you. This letter will try, in a constructive and humble manner, to tell you why I won’t read it, and what else you should try. Unsolicited commercial email is spam — even if it’s sent to twenty VC firms instead of a million random people — so I use that word to describe it here. Spam is costly but those costs are unfairly split. An email costs the sender nearly nothing on a per-recipient basis, but instead places all the cost (of time and attention) on the recipient. If VC firms made a point of reading business plan spam, it would effectively reward the senders of spam, and thus perpetuate the problem in a vicious circle. So, those of us who work for VCs must — for both moral and time constraint reasons — relegate unsolicited business plan emails to the “Trash” folder. However, in the spirit of constructive criticism, I want to point out some good alternatives to business plan spam for getting a VC to look at your plan. These are solid ideas that have worked for firms pitching my employer, [http://voyagercapital.com/ Voyager Capital], but may not be applicable everywhere. – Build your team in-house. It will be very hard to successfully raise VC funding without at least one person in your management team who hsd experience with venture-backed startups (and therefore, at least some connections in venture capital). If you’re having trouble getting seen by VCs, you should consider teaming with someone who has done it before. – Find quality “Angel” investors. Angels (high net worth individuals) often have connections to VC firms and try to parlay their initial investment in your company by introducing you to VCs they may know. While your best bet here is to find angels who are personally connected to you or interested in your product, you could also look to organizations like these: * [http://www.allianceofangels.com/ Alliance of Angels] * [http://www.k4seattle.com/ Keiretsu Forum] – Hire top-notch service providers (lawyers, accountants, consultants). Hiring a “brand-name” lawyer or other service provider often gets you limited access to his Rolodex. The Holy Grail of this route is to find a well-connected service provider who is willing to take equity for payment; his cash flow then depends on your successful fundraising. I hesitate to name names here, but some good signs might be having a Silicon Valley office, reaching out to the entrepreneurial community, or having been the service provider on well-known deals in your industry. – Get out the door and network. VC folks, from general partners down to lowly analysts such as myself, can often be found at technology and business networking events. Here in Seattle in the last few months, I’ve personally spotted other VC folks at events ranging from the [http://www.techcrunch.com/2006/06/01/two-parties-in-two-weeks-seattle-and-london/ TechCrunch / Redfin / TripHub / Farecast Party] to the [http://www.nwen.org/ NWEN Venture Breakfasts] to the [http://blog.seattlepi.nwsource.com/venture/archives/101645.asp PaidContent.org mixer]. Many of these events are free or of nominal cost. This route is easily the best way, since everyone who works in the Seattle VC community is not only good-looking, charming, and witty, but also a pleasure to talk to (ok, in any case, most of us don’t bite). Please note that one thing I did not list is hiring a firm specifically for fundraising purposes. While there may be some situations where hiring a fund finder is appropriate, in most cases, a promising business should be finding VC connections through one or more of the above routes. Remember, in business as in life, you are often judged by the quality of the company you keep as much as by anything else, so having an introduction from a trusted party is the first step to winning the VCs’ trust. Finally, while many VCs don’t explicitly rule out investments brought through a paid fundraiser, they tend to be wary of investing money to be spent on a finder’s fee, rather than on growing the business. (Arrangements where VC introductions are incidental to a consultant’s substantive work on growing and shaping the business are generally viewed more positively.) I hope this note has helped you to understand why your unsolicited business plan will not be read, and how you can go about making the sort of personal connection that will maximize your chances of getting a good deal funded. Best regards, Randall