Things VCs never tell you about raising money

November 10th, 2011

By Allan Maurer

Kabbage chairman Marc Gorlin will speak at the Internet Summit Nov. 15-16 at the Raleigh, NC Convention Center.

Remember those cartoons where an alien approaches a fire hydrant or a telephone pole and says, “Take me to your leader?” Turns out it’s not bad advice for startups seeking funding, says Marc Gorlin, chair of Atlanta-based Kabbage.

Kabbage, which provides working capital to online merchants, nabbed a $17 million B round in August led by Mohr Davidow Ventures and its investors include BlueRun Ventures, David Bonderman, founder of TPG Capital, and Warren Stephens, CEO of Stephens Inc., and the UPS Strategic Enterprises Fund.

So Gorlin understands the venture dance. He’ll discuss “The things VCs never tell you about raising money” at next week’s Internet Summit in Raleigh, NC, where he’ll be one of dozens of digital media, marketing and entrepreneurial thought-leaders participating.

And one of the first items on his list of things for entrepreneurs to consider when seeking venture capital is to the right person immediately.

“No firm where we went in through anyone but a senior partner went anywhere,” Gorlin says of Kabbage’s own experiences in finding venture backing. “If you get a meeting with a principal or associate, the odds of it going anywhere sink to infinitesimal levels,” he says.

While Gorlin’s slide presentation uses humor to make its points, the points are serious.

He’s Just Not that Into You

For instance, his “He’s Just Not that Into You,” section warns that “No means no, maybe means no and soft yeses mean no.”

Nevertheless, Gorlin says, persistence is the key. “Never stop trying,” he says. He’ll point out how many times big investors said “no” to investing in a company before they said “yes.”

Gorlin has solid advice for entrepreneurs. He suggests not pitching the most important venture capitalists on a potential list first. “You’ll get better,” he says.

Know your market

One of the most important things for entrepreneurs to do to prepare for a pitch to a VC, he says, “Is to know your market.”

It’s also a good idea to know your VC. “Take people they invested with out to dinner. Talk about the terms they got.”

Gorlin also suggests, “Don’t be afraid of venture capitalists and their pedigrees. Don’t make them smarter than you.”

But if you do get some discouraging comments, don’t think you’re alone. Gorlin says that one firm told the now quite successful Kabbage, “Your management team is weak and not smart enough to make this work.” Uh huh.

He’ll share more of the actual comments Kabbage received during its fund-raising process, stories, facts and other solid, if funny, advice direct from the digital fund-raising trenches.

Internet Summit is near capacity, so if you’re going, better register soon. During its own fund-raising process, Kabbage presented at TechMedia’s Southeast Venture Conference. The 2012 SEVC in Tysons Corner, VA, is set for Feb. 29.