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VCs Are Not Your Channel (But They Might Be Your Friends)

Occasionally I get calls from folks who get the bright idea that, since VCs have a bunch of portfolio companies under influence, they can leverage selling their stuff by talking to me instead of pounding the pavement to the whole portfolio.

If you’re thinking of doing this, remember that we (VCs) are not your personal sales channel into our portfolios! Consider:

  • VCs generally take a board seat at most; we influence our portfolios, not control them, and we do so at a fairly high and abstract level.
  • Most VCs abandoned the “incubator” model after the ’90s bubble; we prefer that our portfolio companies seek the best service providers for their particular needs rather than establish some sort of Gleichschaltung.
  • We ain’t in it for charity! We’re trying not only to build and sell our portfolio companies, but to seek out new deals, with new capitalizations, and to boldly go where no man has gone before! (er, sorry.) Star Trek aside, this takes up our time, so even if your shiny new product (or dreary old service) is really groovy for a portfolio company, unless it gets them to an exit or gets us a new deal, it’s probably best dealt via a different contact.

Now, all that said, there are some cases where using VCs for leverage into their portfolios does make some sense.

  • You have some particular specialized characteristics that suit one VC’s portfolio well. This could be a mix of geography, stage, domain expertise, etc., like, say, a life sciences IP law firm that caters to early stage firms in Botswana might find affinity with a VC with that same focus.
  • Your sale is at the board level. C-level recruiters come to mind (although this is emphatically not guidance for recruiters to start badgering VC board members).
  • You have some referenceability within the world of VC-funded startups. These people talk to each other, go to work for each other, and start companies over and over with each other. Your sales into big companies (even tech) or lifestyle businesses (even small “startups”) are not representative of what the experience with a VC-funded firm will be, and won’t necessarily reference well among such firms.
  • Your offering will almost certainly speed a company to exit at an excellent valuation (hint: you can’t, or else you’d be a champion VC yourself).

What should you do if you decide to make the pitch?

  • Do your homework — it’s fairly trivial in most cases to discover a VC’s portfolio and the specific investors (partner) on each board.
  • Use your homework — figure out which portfolio companies you have a great deal for, and make your pitch to the specific investor affiliated with that company.
  • Reference successes and, ideally, get referred in. Find other venture-backed companies that you did an amazing job for, and, if possible, get the CEO or VC board member from that company to recommend you. This would be the holy grail introduction.

I personally try to be helpful to decent and courteous sales / biz dev folks, but I think that reading and acting on the above is a bare minimum level of courtesy for sales / biz dev people talking to VCs.

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