App version: 0.1.0

How Do You Find Venture Capital for a Startup?

How Do You Find Venture Capital for a Startup?
Susan Guillory

Susan Guillory

Updated September 30, 2021
Share this article:
Editor’s note: At Lantern, we strive to help you make financial decisions with confidence. To do this, we occasionally feature content that includes information about our partners and their products or services. We do not provide, endorse, or guarantee any third-party product, service, information or recommendations—and our opinions are our own.
f you run a startup, you already know how expensive that endeavor can be. You’ve got a number of expenses, from research and development to payroll. Given the short life cycle of a startup, there’s not always time to secure traditional funding options for startups like bank loans, which often require you to have been in business for at least two years.Venture capital (VC) is a popular option for startups. It’s a way to secure the capital they need to grow, with the added benefit of bringing on experienced industry contacts for mentoring and advice.Here’s how to go about getting venture capital funding for your startup.

Find a Venture Capital Association

The first step in how to find venture capital is to research organizations that work with venture capital firms. At organizations like the following you can find lists of VCs to research.

National Venture Capital Association

The National Venture Capital Association (NVCA) advocates public policy in the venture capital space. It also offers its VC University, which can help you better understand the industry.

Angel Capital Association

Angel Capital Association is a community of accredited angel investors (individual investors who may provide financial backing in a way similar to venture capitalists). While you can’t join as a startup founder, you can find a list of angel investors.You may also be able to find local venture capital associations, which may offer networking opportunities.

Research and Find the VC That's Right for Your Business

The secret to how to find venture capital is knowing that not every VC firm is a good fit for your business. Some specialize in certain industries, and some look for startups at a certain level of growth. Filter through firms in your research to find a few that are a good fit for your startup using these questions.

What’s the VC's Management Style?

If you’re interested in learning how to get venture capital funding, you need to be aware that many venture capitalists want to be a part of your team. That may look like taking a seat on the Board of Directors or otherwise being involved in the decisions for your startup. So, it’s important to consider whether you're OK with sharing decision-making power.The benefit is that a VC can have deep industry knowledge and contacts, so you may be able to make better decisions than you could on your own.As you look at potential firms, be sure to ask what level of involvement they want to have with the management of your startup, as well as what experience they have in your industry.

What Is the Firm's Current Portfolio and Preferred Industry?

We’ve already discussed how to find venture capital investors through associations, but you can dive deeper and look for firms that specialize in your industry.Most have a portfolio page showing what companies they’ve funded. Look for a firm who’s already involved with startups in your space, as they’ll likely be the best equipped to help you beyond providing capital.

Does the Firm Have an Exit Strategy?

A venture capitalist’s goal is to get a return on investment. That can happen a few ways:
  • You sell the company for a profit
  • You make an Initial Public Offering (IPO) on a stock exchange
  • You merge with another company
Some VC firms prefer one of these exit strategies over another, so you need to make sure that aligns with your own vision.

Where Is the VC Located?

Given how adept we’ve become at doing business remotely, it might not matter where your firm is located, but if the firm expects you to fly out every month for meetings, that will dip into your profits. You might prefer to work with a local VC that you can easily access in person.

Ask for Referrals

If you’re in a startup community, you can ask other founders for referrals for venture capital firms. They can give you the nitty gritty on what it’s like to pitch them and work with them. This can also be helpful in securing an introduction to a firm, which may net better results than a cold call.

Reaching Out to Your Target VCs

Hopefully these questions have helped you narrow down your list of potential venture capitalists to a few that really align with your own vision for your startup. Taking on venture capital should be a partnership between your startup and the firm, and since the relationship is one that may last for years, you want it to be a good fit.Once you’re ready, draft a template email you can use (making sure to customize it for the specific firm). Include highlights of your startup’s successes, including numbers that might impress VCs.Most VC firms have partners that specialize in particular industries or niches, so make sure you address your email to the most relevant contact.Venture capitalists get many emails, so you may need to follow up a week or two after you send yours if you don’t hear back.

Creating a Good Pitch

Once you get a positive response, you’ll schedule a meeting where you’ll pitch investors on your startup. This is your chance to shine, but make sure you plan and practice your pitch in advance.Experts say your pitch deck should have no more than 10 slides and take about 20 minutes to go through. Boil it down to what investors most care about:
  • Growth of your startup
  • How you plan to use the working capital 
  • Leadership’s expertise
  • Future sales projections
  • Numbers, numbers, numbers
Expect to be asked questions like how much it costs to make your product, the size of your market, and expected growth. Investors like to see that you’ve done your homework before asking them for money.You may have to pitch several VCs to find the right fit. Once you’ve received an offer, review it carefully so you understand what the investor expects in terms of being involved with your startup and how and when they will exit. Only when you feel confident with the terms (which can be negotiated) should you sign an agreement.

Other Options for Business Financing

Finding venture capital funds isn’t for the faint of heart. It can involve a lot of research and a lot of rejection.Fortunately, this isn’t your only option for getting financing. There are business loans for startups that may have fewer restrictions, such as time in business or credit score requirements, than a conventional or an SBA loan.And if you don’t have good credit, not to worry. There are business loans for startups with bad credit that you may qualify for, though you should be aware that they may come with higher interest rates.The good news is that once you’ve applied for first-time loans, the process gets easier, and you’ll start to build your business credit, which will qualify you for more offers down the line.You might also consider a line of credit. Unlike a cash flow loan that gives you a lump sum of money all at once, a line of credit lets you access up to a certain limit when you need it.A business credit card may also be useful since you can purchase supplies for your company even if you don’t have the cash on hand to cover the expense. 

The Takeaway

Learning how to find venture capital is a useful skill for any startup owner, and practice makes perfect.If you need capital in the meantime, you might consider applying for a business loan through Lantern by SoFi. You can fill out one simple form to get multiple offers from lenders in our network so you can select the one that works best for you.
Photo credit: iStock/andresr
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0821147

Frequently Asked Questions

How do you find venture capital (VC)?
What is a venture capital (VC) association?
Is venture capital the same as angel investing?

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
Share this article: