1. So you’re a venture capitalist, let’s say Grumpy Cat Ventures, eyeing the startup landscape for the next great idea.
2. Or you’re a startup — Cat.ly, perhaps — in desperate need of cash to keep your business afloat and grow into the Facebook of tomorrow.
3. First, Grumpy Cat Ventures has to do copious amounts of research to learn Cat.ly’s story. If it’s a hot company and it’s a later round of funding, GCV will compete with a number of other VC firms looking to invest in the company.
4. But from Cat.ly’s perspective, it may be too early to entertain the idea of venture capital investment, essentially starting down the road to going public or getting acquired.
5. Even worse for Grumpy Cat Ventures, the entrepreneur behind Cat.ly might not want to sell off part of his or her company to a complete stranger.
6. But over time and with enough grand gestures, Cat.ly can begin to come around and dive back into the venture capital world.
7. Thus begins the five- to seven-year process of growing Cat.ly and grooming it for its public markets debut or a large buyer — anything to grow the business and make all parties involved money.
8. The key here is to find the perfect match, venture capital veterans say.
9. Grumpy Cat Ventures is also likely on the lookout for startups that have people who will likely go on to future startups and, in turn, be more lucrative investment options for the venture capitalists who’ve worked with them in the past.
“The single most powerful thing you have in terms of that courtship process, and frankly as a way of building rapport, is when employees of your existing portfolio go on to do something interesting,” said Matthew Harris, managing director of Bain Capital Ventures, adding that the strartup world is ripe with serial entrepreneurs looking for the next big thing. “They know you and come back to you.”
10. According to Neeraj Agrawal, general partner at Battery Ventures, the process is like picking a partner for a long cross-country drive: The chemistry has to be there.
11. The Grumpy Cat Ventures–Cat.ly chemistry is also refined over the course of many dinners and discussions, Agrawal says.
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