How do startups decide which VC firms to approach first?

Question

I founded a fintech company late last year and have been focused on developing the MVP and signing up alpha testers, key employees, advisors and potentially an independent board member. All is progressing, however, I anticipate reaching out for external capital in march/april - and I'm at a loss at how to structure my search for which VCs to approach first. Or in otherwords, how do other startups develop their target list of VCs to approach first and pitch?I've identified Pitcbhook as a resource for researching VCs and thier portfolio companies, despite what seems to be expensive pricing. Also the thefunded.com, which appears to be a yelp-like service for entrepreneurs. Do people use placement agents like PE firms do? Bankers - i'm guessing no. Is it all networking and asking around?Any insight would be much appreciated.

perczel · Accepted Answer

Ultimately, getting VC funding is a network problem. The overwhelming majority of VC funding goes to founders who get a warm intro to the firm somehow (at least in Silicon Valley). Therefore, I’d focus on VC firms you have some connections through your network.
If you have many options, start with the firms that you are less excited about to debug the pitch. Only once you are confident you got the deck and narrative right go for the top ones.
Finally, remember that your top priorities are (in that order): closing quickly, quality of the investor and valuation & control.

Wangta · Answer

One thing I forgot to mention - and this could be completely wrong thinking, but we're tring not to scorch the earth and hit up every VC possible. Our "great idea" - we are sensitive to getting to market as quickly as possible and are somewhat concerned a VC may take the idea and try and implement with an existing portfolio company. Perahps a paranoid concern and it may be unrealistic to expect to keep things secret while attracting a great investor - any thoughts on that would be appreciated as well.

muzani · Answer

I know a guy who was very effective at this. He just made a list of every VC in the region (SE Asia) and pitched to all of them. There's probably more VCs in California than the all of SEA though. VCs try to make themselves visible.I'd say accelerators/incubators take the place of agents. You don't really need the starting investment much of the time, but selling part of the company for 10% early on to handle networking is often a pretty good deal.

ig1 · Answer

Crunchbase is a (relatively) cheap product for this kind of research.I'd suggest talking to other vc-funded fintech founders who've raised at your stage in the last couple of years, especially for products that sit in parallel spaces to yours. They'll know who the relevant fintech investors are because they'll have spoken to many of them.