VC Financing - the Certainty and the Uncertainty

We at Reasonably Smart (James and I) are now fully engaged with the VC community. Since last Wednesday, we have had 5 meetings with various potential partners. The discussions included potential partners Storm Ventures, Montreal Start-up, Neotech Ventures and Desjardins. This week we are talking to OATV and JLA Ventures. I know, we are all over the place.

Obviously, these discussions are not the result of a well thought through plan but more a result of the significant positive PR received so far and leveraging our network. This is both good and bad...

In my previous life, I has the opportunity go through the funding exercise on 3 occasions. This experience exposed my to all types of organizations all over North America, including VCs, Investment Banks, Sub-debt lenders and the advisors. Although I talked to several North American VCs, the VCs I became close to were mostly Montreal based. To be truthful, I have little experience with the "valley" based organizations. With Reasonably Smart, this is changing quickly...

The current business is much more "technical" than the last business. It does not have as big a service component so it fits very well into the VC sweet spot. Which is great because everyone we contact is somewhat interested. The downside of this is, everyone is interested. Combine this with the fact that we are being contacted because to of the PR and it's obvious that targeting and keeping focus are going to be key challenges we need to navigate.

With my somewhat limited experience I am pretty sure of some things and unsure about many other things when it comes to raising money. Here's the summary:

Certainty:

• Conceptually, raising equity is straightforward
• In reality, raising capital is often affected by factors beyond your control
• The Canadian VC market is stagnant
• A couple of Canadian VCs still invest in good businesses so they can't be ignored
• Referrals really help
• Advisors are usually overrated, viewed negatively by the VCs and unnecessary for early round funding projects
• Fund raising without a targeting strategy causes inefficiency
• A VC's deal flow and timing can and does affect whether a good idea gets funded with them

Uncertainty

• Do you ever submit an Executive Summary via a VCs website?
• How do you really target the "best VCs" for your business?
• When is a VC just saying nice things and when does what they say really mean they want to invest?
• Is a California (valley) based VC really the be-all and end-all for a software company?
• How much does an strong advisory board help?

With these ideas and questions in mind we are now both reacting to the interest and approaching "target" VCs. We are absorbing all the advice that comes our way and we are hopeful that we make the best decisions for this business. Ultimately, we are not looking for the "perfect deal", just a good deal with strong partners to help us get this venture growing.

If we accomplish this reasonablysmart.com is on its way!