Networking . . .

refers to a method many investors use to identify viable companies and syndicate investments. Networking refers to sharing information and prospects with other investors and persons involved in the venture capital process. Networks can be as informal as loosely knit associations among investors and their consultants or as formal as a trade association or networking organization. Many venture capital clubs provide regular opportunities for investors, and sometimes entrepreneurs, to meet and discuss mutual opportunities. Incubators and technology development centers also provide a base of networking for entrepreneurs.

Networking is important. Many investors will not consider an investment proposal unless they receive it with a recommendation from someone they know. Certainly, most investors are more likely to consider a business plan seriously if it is recommended to them by someone they trust. Business plans that come unannounced through the mail have less chance of being read than plans that are accompanied and preceded by a call from a friend or acquaintance.

Entrepreneurs should recognize the existence and importance of networking when they solicit funding. Whenever possible, entrepreneurs should use an introduction of an acquaintance to help them get the attention of an investor. Often the best way to become a part of a community’s venture network is to join an incubator or attend chamber of commerce or local development authority meetings. Sometimes, the right banker, accountant, or attorney (one who deals regularly with venture capital) can introduce the entrepreneur to the area’s network. See: Deal Flow, Incubators, Shopping, Technology Development Centers, Venture Capital Conferences.