How Do Venture Capitalists Find Companies To Fund?

As an entrepreneur and former (part-time) venture partner having picked companies yielding over $100M exits, I can tell you what my process is. A process that is not. A methodology that differs dramatically from traditional venture firms, its operating-model now intrinsically blind to finding outliers.

You see, to find an outlier of innovation, you as a venture capitalist must yourself be an outlier of thought to break the norm. You must be critical to the way the world works, and not have been sucked into the pageantry of positivity that reverberates so loudly throughout Silicon Valley. You must be critical and see inefficiencies where the majority do not. You must understand that technology risk is the least of risks in a technology company. You must be able to grasp a higher normalization of truth ready to be met with unprecedented opportunity, here and now, to yield consistent venture-style returns for limited partners.

The sourcing of “deals ” in venture capital firms is usually assigned to associates fresh from school who, just released from the dogmas of an outdated school system, have little propensity to find themselves let alone recognize outliers in the real world. If they happen to find something of interest, they propose it to a general partner, who then, in the process of supreme socialism, takes it to the Monday morning partner meeting for a vote. This process is sure to drown any prospective outlier.

The way I met my first company in Silicon Valley was at a friend’s Christmas party, where the friend-circle had already judged for me, the company was not worth pursuing. Ignorance of socialism remaining bliss, I listened to the company anyway, and more importantly, the people behind the company, and judged I would review their business plan. I did shortly after that and quickly sent them back home with it, in the direct way only a former Dutchman can describe a load of rubbish. They shopped around for other suitors, and some two weeks later came back, asking what was wrong. Long story short, I incubated the company, reworked the business model, which yielded immediate focus and revenues, and subsequently raised money and sold the company six years later for an incredible amount.

Every company worth finding I found in different ways, by being me.

The reason why I divulge so much about the totality of my “process” is not to boast, but to explain how the cookie-cutter process deployed by venture firms keeps them stuck on the predestined rails of self-induced subpriming. A process part of a rigid system of collusion proven unable to marry outlier entrepreneurs with outlier investors. Elon Musk, unable to find venture investors at first, being the salient evidence of venture’s self-induced paralysis. They later sheepishly hopped on board as success is destined to claim many fathers in need of raising another new fund.

So, to sum up, my answer, the process by which venture capitalists find you is indicative of who they are, and frankly who you are. If you roam the avenues much-traveled, you will be treated like a frequent flyer, rewarded with all the mediocrity that comes with it. Be provocative and outspoken in your opinion with a passion and drive to change the world for the better, and you will find the investor with the same wherewithal.

The sign of an intelligent nation is its willingness and ability to reinvent itself, upstream. Let’s inspire the world with new rigors of excellence we first and successfully apply to ourselves.

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