Joining the VC Scene in Atlanta

In recent months, I have been asked with increasing frequency about plugging into the VC community in Atlanta.   I find the question somewhat disarming as only 3-4 years ago, many people might have responded, “What VC community?”  The Atlanta venture capital/early stage community (For this post, I’m going to use the “venture capital community” term to incorporate both, knowing full well the distinction between the two.)  is clubby, political, and somewhat exclusionary.  It is also nearly invisible to the outsider.  Remember, even StartupLounge’s mission, for all of our “community” talk, is to provide a safe haven for the true VC community players.

This blog post is directed at those of us with an interest in the community but are not direct participants – i.e. not currently or not yet investors or entrepreneurs, but rather service providers, observers, educators, media, etc.

Let me be clear about one thing – if you decide you want to be a part – really a part – of the VC community in Atlanta, it is not a trivial exercise.  You had better really want to be a player.  You really have to “pay your dues” to become accepted in the community.  And I’m not talking about paying those dues over a period of weeks – try months just to get your foot in the door, and years to really be “in”.  Alternatively, you can drop several hundred grand on an angel investment or two and that will get you “in” quickly.   Call it superficial, but if  you’re a real check-writer, that’s instant cred.  It’s not that the VC community is full of snobs – they are just tired of having their time wasted by people that are looking for the quick payback and then when they discover there isn’t one, disappear like free phasers at a Star Trek convention.

Now, with that preamble, here’s some advice for the rest of us.  It’s a myth that if you’re a service-provider, you’re on the outside.  I’m a proud service provider and I don’t think I’m on the outside, and there are many others who are in the “circle” (think “Meet the Parents” – see Scott – I do watch a movie once a year or so).  It’s also a myth that if you’re an entrepreneur, you’re on the inside.

Be a contributor

To establish credibility in the community (or any community) you must contribute to it.   The difference in the VC community is that it’s harder to contribute.  Logically, the question is “how do I contribute”?  First, you need to understand what is considered desirable in the VC community.

Let’s start with the entrepreneurs first – they are easy.  What 95% of entrepreneurs need is a) capital or b) customers.  They don’t need audit services or valuations or “top talent”.  They can’t afford any of them.  And they are being sold services they don’t need/can’t afford  all — day — long.   And most entrepreneurs don’t need “advice”.  They get it all the time, often from catastrophically unqualified sources.  If you connect an entrepreneur to a paying customer and/or a check-writing investor, you have solved a major problem for that company and possibly changed the net worth and family harmony of that entrepreneur seismically.  Once you’re known as a resource for customers and/or capital – believe me when I tell you you will have many, many friends.  StartupLounge is a prime example with respect to me personally.  Thanks to StartupLounge, I am in a position to be a capital connector.  Without it, I’m perhaps somewhat interesting, given my VC/i-banking background but I am under no illusions – I’m much more interesting because I hang with the check-writers, and some of them (at their peril) seem to view me with some degree of credibility.

OK – let’s talk about the investors.  They need two things (particularly VCs) – deal flow and limited partners.  There are two ways to kill a VC fund.  Make bad deals and fail to raise capital for the next fund that pays the management fees.  Generally, one begets the other, but not necessarily.  Some general partners are surprisingly good salesmen and spin-doctors.  But I digress.   Let’s be clear – most VCs don’t need CEO candidates.  They already have them in their contacts and relationships.  They have dozens and scores of consultants in their address book.  And also, let’s face it, I’ve met very few VCs that lack self-confidence in their decision-making.  To sell services to a VC, you had better bring something rare to the table – like a lefty pitcher with a 98 MPH fastball.  If you think you’re going to be the beacon of wisdom and reason that leads VCs to the promised land of business enlightenment, go back to drinking your Kool-Aid.  Your world sounds a lot cooler than the real one.

I need to expand on deal flow here.  If you want to get your e-mails sent directly to SPAM without passing Go, send VCs every “deal” you possibly can.  Flood their email boxes with unfiltered deal flow.  Don’t send deal flow unless you know what the fund invests in and why.  Sending every deal that comes down the pike to your one VC contact makes you a laughing stock rather than a resource.    Learn and pay attention to what VCs invest in and be their filter.  Then, be a “hard grader”.  Be a tough gatekeeper.  Really respect the VC’s time.  This applies to angels also.  Be prepared – being that gatekeeper can make your friends mad.  If so, you start to understand the slings and arrows of outrageous fortune the typical VC suffers daily.

You can make up for this to a limited extent if you can hook a VC up with potential investors of their own – these are people that manage pension funds, endowments, funds-of-funds, family offices and the like – or possibly super high net worth individuals.  LPs are even more golden now than in prior years because so many such investors are pulling back in their allocations to alternative investments — some are even defaulting on their existing commitments.  Make no mistake – a professional venture capital fund manager always wants to meet potential limited partners – whether they are raising a fund today or not.

Also, bringing customers or capital to the invested companies is generally welcome.

What if you don’t know lots of investors, customers and/or billion-dollar endowments?  See below.

Educate yourself

You will find it tough sledding to plug into the VC community if you don’t understand how it works.  You need to at least understand how the venture building and investment business works on a high level.  It’s tough to break into a community if you can’t even have a 10 minute high-level conversation about the industry.  Attend panel discussions and speeches by VCs and successful investors.  Read books like Art of the Start (not without its flaws but still a seminal work).  Listen to the StartupLounge podcast.  Familiarize yourself with the websites of the National Venture Capital Association and the Kauffman Foundation.  May I immodestly plug my book?  Talk to people.  Talk to people trying raise funding.  Talk to attorneys and accountants who do work for the VC community.  Don’t tell them how great you are.  Ask questions and listen.

Learn an industry or two.  You can’t and shouldn’t plug into the VC community if you don’t have some genuine interest in the industries of interest.  It could be nanotech, information security, medical devices, alternative energy, social networking, or whatever.  Are you one of those World of Warcraft addicts!  Put your +2 Battleaxe of Frost down and learn about digital media.  Wherever your interest lies, become a student of the industry and make a commitment to stay current.  Most successful entrepreneurs and investors make a lifelong commitment to learning.

Then think more broadly.  Become informed on the long and hotly debated legislation to permit Georgia’s pension funds to invest in alternative investment classes, including venture capital funds.  What industries seem to be hot, and why?  Which companies were big successes during the Golden Years of 1996-2000?  Know what the important organizations do, such as the ATDC, VentureLab, TAG, Institute for Enterprise and Innovation, MIT Enteprise Forum, Intelligent Systems, Atlanta Web Entrepreneurs, and what the differences are between them.   And (this is perhaps the most important), know who the player wannabes are.  There are a small number of individuals and organizations that are shunned and mocked by the mainstream Atlanta venture community.  Find out who they are and be sure you don’t fall into that crowd.  Yeah they are technically part of the community, but they sit at the dweebs’ table in the cafeteria.

Go Web 2.0

Hit the blogs

A lot of the important players in the local and regional VC community blog regularly.  Lance Weatherby, Stephen Fleming, Charlie Paparelli, ATDC (Peach Seedz), Greg Foster, Sanjay Parekh, Scott Burkett, Urvaksh Karkaria, Knox Massey, Jason Caplain and Mike Schinkel all maintain informative and frequently-updated blog sites.  TechDrawl is very good, too, although they cover the entire Southeast.  I’m probably forgetting several other very important bloggers and if so, I apologize.  The point is that there are so many good blogs by people who matter in this community, I don’t have time to keep up with all of them.  There’s just no excuse for being uninformed about the venture capital community in Atlanta and the Southeast.  And post to the blogs if you have something intelligent to say.  We bloggers love people who post.  It shows someone is actually reading these things and bumps our web rankings.

Be a Twitter- Bird

If you don’t know what Twitter is, it’s time to step away from the butter churn and turn in your buggy for a Prius.  Embrace the world of wireless broadband and federally-owned car companies.  Twitter is a hybrid of instant messaging and blogging – limited to 140 characters a post.  Almost all the leaders in the Atlanta VC community are on Twitter (with some very notable exceptions).  If you want to know what community insiders are doing or thinking about or just passing spare time, find them on Twitter and follow them.  You’ll learn how to tune a lot of the noise out surprisingly quickly.  If your goal is to plug into the VC community in Atlanta, you put yourself at a major disadvantage if you eschew Twitter.

Don’t be “That Guy”

One of the worst things you can do is to wedge yourself in where you’re not welcome.  It might have been cool to crash dorm parties in college.  It’s really uncool to do it now and in this community.  Whether people confront you or not, they notice – and eventually they will confront you.   Mostly, you’re unwelcome if your purpose for attending is to sell.  We actively exclude salespeople (except for our sponsors) from StartupLounge’s events, and many organizations are doing the same.  Open Coffee, Startup Dinner, Startup Riot, Startup Chicks, Atlanta Web Entrepreneurs all want to provide an environment for just entrepreneurs and investors.  When you wander in and start yapping about your life coaching offerings, you are a buzzkill – like Buzz Killington.  People remember Mr. Buzzkill and will do everything they can to not talk to you next time they see you.  And they talk about you behind your back like a bad Mean Girls sequel.  The cattiness of the VC community on Twitter sometimes makes Will & Grace look like Meet the Press.  We respect people who respect the boundaries.

Volunteer

This is Ricky Steele 101.  If you haven’t read his book, read it.  Business plan contests need judges.  Entrepreneurs need mentors.  CapitalLounge always needs badge-hander-outers.  And maybe bouncers.  There are always tables to set up, badges to stuff and organize (not that you’d know it at StartupLounge), and events to organize.

Sponsor

Most organizations need money to carry out their missions, and they want and need sponsor dollars.  In exchange for those sponsorships, you will gain admission to some of the most coveted groups, and the leadership of the organization you sponsor should be only too happy to introduce you to their key players.  Yes – you’re buying your way in.  Sometimes life works that way.  Trust me – you don’t pay the fees to join Country Club of the South just for the golf course.  Buying your way into a community (or marrying into one) has been accepted for millenia.

Slow but steady wins the race

You will not get plugged in by a short burst of energy trying to be everyone to everybody everywhere.  You’ll have as much staying power as Ashlee Simpson.  Be focused, be consistent, be low-key and be a resource and connector.  If you hang around long enough, you’ll eventually get noticed – but you need to do that over a period of months.  Don’t be pushy – just be present and available.  And do more listening than talking.  Ask more questions.

Where to go?

Fortunately, there are a few places where entrepreneurs and investors can be (sometimes) encountered in the open and don’t rigidly control their attendance.  They are

The Ritz Group

ATDC (especially the ATDC Showcase)

Some TAG events – particularly with ones featuring venture capitalists like their Meet the VC Program

Some MIT Enterprise Forum meetings (I am very excited about incoming President Mike Bloom’s plans for the organization)

The Indus Entrepreneurs

Gwinnett Chamber of Commerce meetings

Atlanta Venture Forum (the ratio of service providers to investors is about 25:1 but at least it’s not #VALUE – in Excel terms)

VentureAtlanta

High Tech Prayer Breakfast

American Israel Chamber of Commerce meetings

Plugging into the VC community in Atlanta is neither easy, nor a short-term exercise.  You need to be thinking long-term gratification.  You’re going to run into a lot of service providers along the way, but I know that entrepreneurs and investors do participate in these groups.  Don’t judge the value by attending just one.  Go to at least 3 before reaching a final evaluation.

Be real

If you want to be part of the community, then do it for the right reasons and be sincere.  VCs and entrepreneurs are trained to spot phonies a mile away.  They see fly-by-nighters every day.  And word gets around quickly.  Believe me when I tell you you’re not the first person to think “hey, there’s a potentially great market in the VC community”.  Staying power and long-term presence are your distinguishing features.  Being real means making yourself a resource to connect entrepreneurs and investors with what they want.  Being real means not being in sales mode most of the time.  Being real means following up on all of your commitments, even the ones it turns out you can’t keep (and you quickly learn to under-promise).  And if you can’t keep a commitment, communicate that you tried but it’s not going to work out – don’t just go dark and hope the person won’t remember.  They will and it’s worse when you try to run away and hide.

So why plug in?

The hidden purpose of this blog was to prompt you to ask yourself that question.  I hope I’ve established that there is no low-hanging fruit in this community from a business development perspective.  It’s a mirage. In fact, the VC community is some of the highest-hanging fruit around.  You plug into the community  because you love it and you have a passion for it.  I do it because I admire entrepreneurs.  I like being around the VC investment community.  Entrepreneurs are cool.  So are investors.  Getting sneak peaks of the technologies around the corner (some of which I understand better than others) really jazzes me.  Entrepreneurs inspire me to be a better valuation professional.  I love being part of StartupLounge.  Now, there’s a big difference between high-hanging fruit and no fruit.  There is business to be done, but you have  to think about your investment of time the same way a VC thinks about investment of capital – high risk, high reward, long incubation period, lots of effort along the way.