• How-to

Venture capitalists are usually a busy lot. Their time is more invaluable than yours, and their decisions harder. How you go about identifying and approaching the right venture capital firm is, thus, very important.

Make a list
A good way to begin will be to create a list of all the venture capital firms operating in India. There are a few ways to go about doing this. Try linking up with a firm or an agency that actively tracks VC deals. While there are firms overseas that sell such data, there are only a couple in India—and they may or may not entertain you. But if you do get hold of this data, consider it a jackpot. Any firm that has made recent investments is more likely to invest in you than one that hasn’t.

The second way is to register with the many entrepreneur networks active in India, such as NEN and TiE. These networks keep extensive data on both domestic and overseas firms. More importantly, they will be able to give you direct access to some of the VCs as well.

To get a pure name, phone number and address list, hit the lists of registered VCs with the National Stock Exchange, the Bombay Stock Exchange, and the Securities and Exchange Board of India. Though these are freely available online, expect some of the data to be outdated, given that it is registry data.

Filter it
A long list is good. Now, you must sort out the data and shortlist it according to certain factors that will narrow down the target for you. First, filter out the data to nail down VCs that match your industry sector. If you are starting up in the IT sector, there’s no point in even contacting a VC whose website says they are specifically keen on the agri sector. Cut out such VCs from your list. The firm’s website will also say where it has its offices. If it does not have an active office in India, there is hardly any point in pursuing it. If you’re starting up, you will most probably not be in the position to fly overseas. So, this is your second filter: the location.

The third filter has to do with which companies the VCs have been investing in. This information is most likely to be on the firm’s website. Why is this important? Well, approaching a firm that has invested in a similar or competing company may lead to your critical business information going to those companies. By and large, however, VC firms have honest people at the
top who are unlikely to entertain this.

Nail down the moneybags
This pointer relates to whether or not you can find data on VC deals that have taken place in the past couple of years. This data will tell you which VC has the money right now and is active.

There are two important pieces of data you must find out about the VC: the size of its last fund, and when it was closed. If this information is not available on the website, use Google. Read up articles and interviews about the firm and its partners. There will be bits and pieces there to pick up.

Compare that data with the companies it has invested in, and whether or not it’s been active in the last two years will give you a clear indication of how likely it is to fund you. Sort them out from the rest.

Move all such companies into a sort of ‘Green Zone’ in your list. These are the firms you should be approaching first. Look out for how to go about doing that in our next issue.

This is the first of a multi-part series.

©Entrepreneur February 2010

Tags:
funding, VC, venture capital