If we look back ten years, the venture world was quite different. Investors weren’t too keen on investing out of town. And given the fact that the majority of top investors were congregated around Silicon Valley, many entrepreneurs felt compelled to move to the valley to start their business. It was much harder for a “remote” company in the Mid West, Europe, or Canada to draw any attention to themselves.
I’m less interested in the regional differences than I am in the fact that it’s now possible to build very large, global businesses from anywhere in the world…The Internet is global. Geography is no longer the destiny it used to be.
And what is true for start-ups is also true for venture capital firms. The Internet has disrupted traditional geographic barriers for venture capital in the same way and world-class investors are emerging outside of Silicon Valley.
Look global and local
What does this new dynamic mean for today’s start-up seeking funding? In short, you’re going to want to look for the best funding partner (or collection of partners) possible, rather than just focusing locally.
Many firms have developed specific areas of focus and these type of investors can be extremely helpful in strategic matters. For example, NYC-based Union Square Ventures has built up the most experience around “large networks of engaged users”; Berlin-based Point Nine Capital is one of the strongest early-stage SaaS investors; and version one ventures probably has more marketplace investments than most seed funds.
Thesis-driven investors, like USV or version one, can be instrumental in helping you navigate questions like product roadmap or fundraising because they work with similar start-ups in your space and really understand the area.
Likewise, local investors are usually better positioned to provide more hands-on help. One of the biggest advantages here is in hiring: you can pull from their local network and local investors can even interview key hires in person. At the end of the day, you’ll want to find the best partner(s) that meets your specific needs and situation. In some cases, this is local; in others, it’s a remote expert; or a mix of both.
One final word of caution: if you’re going to go with out-of-town investors, you’ll want to see that they have already made investments outside of their own location, so you know they can communicate and operate well virtually (and are willing to travel to their portfolio companies). In other words, you don’t want to be the trial run for a remote investment.
N.B.: AngelList is a great way to identify investors that might be a good fit for you but it is probably not yet the best way to pitch and close them. Getting warm introduction from a trusted source still has a much higher likelyhood for conversion that simply sending messages on AngelList.
- How the Internet changed the venture capital landscape: Albert Wenger (business.financialpost.com)
- Union Square Ventures is back in Berlin: $7m Series B for THE Football App (venturevillage.eu)