What Happens After The VC Associate Cold Call?
An entrepreneur I really admire asked me for advice on how to handle associate cold calls from VC firms. I thought the best way to answer that question is to share what happens after the cold call so entrepreneurs can deduce for themselves how to handle it. I’ll describe what happens at Volition Capital, but having been in the industry for 14 years at a few different firms, we’re a broad proxy of what happens at other firms. Where we might be distinct is as a smaller firm, the partnership probably gets involved earlier and more broadly than at other firms. Given that, let’s see what happens after the cold call:
[click] The conversation with the associate is over. The associate will then enter the notes of the call into Salesforce. If the company is deemed by the associate to fit our specs both in terms of what the company does and our investment focus (more on this later), the notes of the conversation will be emailed to the entire investment team. Elevating the visibility of the company through this means happens irrespective of whether the company is interested in raising capital. Every investment partner at the firm will read the notes of that call within 24 hours. Typically some email dialogue on the company occurs at this time. In addition, those notes will be included in a packet for discussion at our Monday team meeting. We discuss every company that has been elevated in this way every Monday. It is at this meeting that we decide next steps, if any, with the company.
So, the net of it is very clearly this: If you want partner visibility for your company – talk to the associate.
Associates are assets to you in two ways: (1) They know what kind of opportunity the firm gets excited about, and (2) They know which partner would probably like the opportunity the most. As one of the managing partners in my firm, I absolutely pay attention when an associate is excited and has conviction around a company. I trust the judgment of the associates at our firm. So, my advice to companies is if you want to have the conversation with the associate – treat the associate like you’re talking to a partner because the salient points of what you communicate will not just get to one partner, but all of the partners of our firm.
What about the conventional wisdom that some entrepreneurs adopt which is to tell the associate you won’t talk to anyone besides a partner? I presume entrepreneurs ask this question to assess how interested the VC firm really is in their company so as to not waste their own time. The logic being that if the VC firm is really interested, they’ll get a partner on the phone. I don’t believe this approach actually accomplishes that. What this approach forces is for the associate to make a deduction about whether your company is worth partner time, without knowing much about your company. So, the associate essentially has to guess. Whether this approach leads to a call with a partner is based less on the merits of your company, and moreso on whether the associate is a good guesser. It’s more or less left up to chance.
The better approach in my mind is to ask the associate what specifications he or she is looking for and decide whether you should do the call based on how closely your company fits those specifications. For example, if you asked a Volition associate what our investment focus is, they would say this:
- Sectors: Internet, software/SAAS, tech-enabled services, information services
- Revenue: Typically $5M-$30M+ revenue
- Revenue growth: 25%+ minimum, typically 50%-100%
- Financing history: limited or no prior capital raised
- Profitability: Near break-even or profitable
- Most importantly: Aspirations for Greatness.
Companies that get elevated to the entire firm typically fit most, if not all, of these criteria. Other VC and growth equity firms likely have very different criteria, so this is clearly Volition-specific. If the associate can’t give you specific criteria of what they’re looking for, then he or she is probably just fishing and their firm probably has more of a referral-based orientation. In this case, it may make sense to ask for a partner.
Given this backdrop, if you think your company does or will eventually fit the spec of the calling firm, and you either want to build relationships with investors for down the road or raise capital in the not-too-distant future, then I’d say have the call. If your company doesn’t fit the spec and likely won’t, then it’s completely fair game to let the associate know that and politely decline the call. If you’re not sure, it never hurts to know what firms are looking for and just keep your own database for future reference.
I hope this is helpful. If you have other questions to demystify the VC process, please feel free to comment. If your company fits the criteria I stated above, feel free to call me or any of our associates – it’s all the same 
.
Why Volition Capital Invested In Globaltranz
Volition Capital announced a $10M investment in Globaltranz this week. We couldn’t be more excited about the investment so I thought I’d share a little bit about why. Globaltranz enables small businesses to go online to comparison shop and procure freight capacity – most notably trucking and other modes of transport. It is somewhat analogous to how consumers use Expedia or Orbitz for airline travel, but in Globaltranz’s case, the end customers are businesses that are procuring freight. Next time you’re driving on the road, look around at the trucks on the road – Globaltranz probably had a hand in putting cargo on that truck.
The value proposition is very simple. Globaltranz offers more selection and better rates to small businesses that ship goods. In tougher economic times, the ability to save money on non-core functions like shipping is really valuable to small businesses. On the flip-side, Globaltranz offers freight carriers (e.g. trucking companies) a low cost way to reach the small business customer. It’s too expensive for carriers to sell small businesses direct, yet they certainly value additional volume given the fixed-cost nature of their business. The value is very clear to all parties which is probably why the company is growing so aggressively.
Globaltranz represents exactly the kind of company that Volition loves to invest in. They are high growth: ~100% year-over-year growth for a number of years in a row. They have a sizable and diversified revenue base. They are bootstrapped: having never raised any institutional capital throughout the company’s history. They are led by an experienced and dedicated management team. And they have aspirations for greatness: their stated goal is $1 billion in revenue which given the size of this market is attainable. They have accomplished a lot without any investment, and it is our hope that through our partnership and capital, the company will achieve even greater heights going forward.
Needless to say, we are very pleased to be the first institutional investor in Globaltranz.
Which is your favorite video? Happy Holidays from Volition Capital
Volition Capital Leads First Investment – G5 Search Marketing
I am pleased to share in today’s announcement that Volition Capital has led its first investment with a $15 million financing in G5 Search Marketing.
The investment thesis for G5 is pretty simple. 100% of mid-size businesses would love to have an online presence that consistently generates high quality, low cost leads – and 99% of mid-size businesses don’t know how to do it. To achieve the goal you need to be expert in website design, search engine optimization, search engine marketing, and multi-channel lead management. And, perhaps most importantly, you need to understand how all of these areas interrelate specifically in your industry. G5 fills that gap in certain large verticals where they have domain expertise – like self-storage, multi-family housing, and senior living. The thousands of mid-size businesses that have become G5 customers have their website and marketing efforts outsourced to and managed by G5, and they see the impact immediately in terms of low cost, high quality leads.
The wide disparity in results between using G5 and doing it yourself has led to a highly recurring, bootstrapped business which is right down the sweet spot of Volition Capital’s investment focus:
- High growth & solid revenue base: 20 consecutive quarters of record revenue.
- Capital efficient & founder-owned: They have never taken any outside capital or debt.
- Under-served geographic area: Beautiful (and hard-to-get-to) Bend, OR
- Volition Capital investment: First and last institutional capital, active Board involvement
One attribute of G5 which is key to all of our investments is we want to see the team have an “aspiration for greatness”. Every Volition portfolio company needs to have both a proven business and breakout potential. The latter starts with the management team thinking big – which is certainly the case here. The number of mid-size businesses that could benefit from using the G5 platform is not just thousands, or tens of thousands – but potentially hundreds of thousands if not eventually millions. The first-generation “local search” vendors adjacent to this space have a narrow/weak offering and poor value proposition – which is readily obvious given their high customer churn rates and lack of profitability. G5’s intensely loyal customer base and strong financial performance demonstrates that they are doing things both differently and better. We believe G5 represents the next-generation in local marketing solutions and couldn’t be more proud to partner with them.
Cortera – Crowdsourcing Business Credit Ratings
Congrats to Volition portfolio company, Cortera, which launched their new website yesterday. Cortera has a pretty simple mission in life – bring great financial and credit information on businesses to users at their fingertips for free or nearly free. Cortera also allows any business to rate any other business on how they pay their bills. It’s crowdsourcing for credit.
It may not be obvious, but business credit ratings are driven by a few thousand large companies. They contribute accounts receivable data (information on how their customers are paying them) to companies like Cortera and others. That data is sliced and diced to produce credit ratings that businesses use for every day decisions like extending payment terms and credit decisions.
The flaw with the model is that if you are not one of those large companies, the experience of how your customers pay you never enters into the calculus of credit ratings. On the flipside, if you aren’t a customer of one of those large companies, you may never be rated for your credit worthiness, even if you pay your bills in a timely fashion. Millions of small businesses are left out of the credit equation today.
The only way to address this problem is to democratize the inputs for credit ratings. Allow any business to rate any other business on how they get paid. Expand the data contributors from a few thousand companies to a few million companies. And then make credit and financial data easily accessible and very inexpensive. Better data for everyone is the result – that’s the aim for Cortera. It’s a grand and worthy goal that we’re proud to be working with them on.
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