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Thursday, February 24, 2005

TieCon East matching venture capitalists & entrepreneurs

It is a very popular question that I am asked by both entrepreneurs, business leaders, and entrepreneurs (or those thinking of becoming one). I had posted my tips for entrepreneurs to seek venture capital in a previous article. But today I want to build on my suggestion about networking to find the right partners, either as a venture capitalist or as executive seeking to acquire startups or as entrepreneurs looking for either venture capital or companies to work with.

2005: Year in which VC cash is plenty

But before I go any further, there is plenty of good news for anyone seeking investments from venture capitalists. If you know how the venture capital industry works, it is very simple to understand that these folks are as desperate to invest their funds as entrepreneurs are to find investors. And 2005 happens to be an year in which the level of desperation is particularly high. According to Keith Benjamin and Pascal Levensohn, managing directors at Levensohn Venture Partners, and quoted in the Business 2.0 magazine, a huge chunk of the $13.5 billion in VC "overhang" will pour into startups in the next four to six months. If VCs can't spend the rest of it this year, they must return the unused portion to investors. Even worse, they'll have to relinquish the 2 percent management fees they've collected over the years. That means passing up tens of millions of dollars -- unless, as one VC puts it, "I can shovel money out the door."

How to network your way to a VC?

That brings me to the topic of networking. Now as I said before, if you have an idea or a business plan and you send it to a venture capitalist, chances are it will be deleted even without being read, probably by an EA. But there are other ways to get a face-to-face meeting with a VC (and a receptive one too) if you attend a conference that brings together venture capital firms, angel investors, large corporations (looking for acquisition candidates), and of course, people with bright ideas (and maybe a little operation in the garage).

I want to mention TIECON East conference scheduled in April this year. It is one of the best conferences for networking. Indeed, I ran into a whole bunch of people last year who had no idea what a business plan was, but they could give you a tutorial on rocket science in 30 seconds. But on the whole, I met some high-quality individuals and learned a lot about the trends and drivers. I was so impressed that this year I am volunteering some of my time helping out with marketing initiatives.

Remember, when I was giving suggestions on how to develop a business model that is robust enough to capitalize on short life cycle products, I had suggested that if you read it somewhere, it is not an idea worth pursuing. Well, to find out what the latest thinking is, you have to hear what lies buried in people's heads and there is no better way to do it than to schmooze with the techies, the VCs, and budding entrepreneurs.

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