How To Convince Picky Investors To Part With Their Capital

Granted, venture capital firms have been backing faaaar fewer IPOs this year, but investors are still willing (and able) to invest.In fact, during the first half of 2008, VCs invested about $62 million more than the same period in 2007, according to the latest Money Tree Report from PwC (PDF), whose tally for VC funds raised during that same period came in at $19.2 billion.

"There is someone who will fund every quality company that solves a relevant problem in a capital efficient manner," says entrepreneur Scott Painter, in an interview with GigaOm. And he should know: With 29 startups to his name, including CarsDirect.com, Painter has raised hundreds of millions of dollars during the course of his career.

Painter shares his 12-step process for approaching, vetting, and meeting with VCs (note his reliance on Web tools):

1. Skip the PowerPoint. "Its expected, [but] a waste of time," says Painter. "I never go into a meeting planning to present a slide deck."

2. Build a Web toolkit instead. Painter means a Web-hosted version of everything you would have put in your deck, including your financial models. "Viewers can toggle the metrics up or down if they think my assumptions are wrong, and the whole model adjusts," Painter says.

3. Lock it. Make your tool kit a private site, accessible with a login ID and temporary password of your choosing. When you invite viewers to the site, require that they use a personal email as their login ID.

4. Build your mailing list. Painter starts with up to 1,000 VCs and narrows it to "a few hundred" who have investments compatible with his startup. Use sites like The Funded to help you narrow your list.

5. Send the "sexy tease." By now Painter's email is written, and it's short. He introduces himself in a sentence, offers a sexy tease on the company and closes with: "Here's a link to a site if you'd like to learn more." Do not ask for a meeting, Painter warns. Do include your site's password.

6. Wait two weeks. Change the password.

7. Check the logins. Since you've required personal emails for the login ID, youll see each investor who looked at your plan, what they reviewed, and for how long. "And when a VC says 'We're going to pass,' I can tell if he hasn't even gone to our site. Expect a 10 percent view rate from your email blast.

8. Now reach out. Your first round of calls goes only to VCs who have already reviewed your plan. The cold call is now a warm call: "We see you went on our site. You looked at X. Do you have other questions?" Expect two-thirds of your viewers to return your call.

9. Request a meeting. By now you've reduced your initial task list of 200 VC-contacts to 20 calls and 12 phone conversations. Be pleased if half of these take a meeting.

10. Meeting one. Smile. Listen. Be responsive. "And get out of there as quickly as possible," says Painter. "The only goal is to get meeting two."

11. Meeting two. Make it long. "I always try to see how long I can keep them asking questions." Talk about your philosophy, your industry. Spring to get employees on the phone with answers.

12. Dinner. "This is about getting personal, because you'll need a champion, someone who'll say 'this is my deal' in the final partners meeting."

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