QUESTION OF THE DAY: Should I work with an Associate at a venture firm?

"We emailed a Partner at a venture firm about our idea. He had an Associate contact us and request a lot of information. Should we respond to the Associate? How much should we reveal to him?"

That's a question I am often asked these days. A decade ago VC firms had only Partners. The current generation is using Associates as they begin to establish hierarchies and career paths in the second generation of modern VC firms emerges.

Here is how the VC funding process works for many first time entrepreneurs:

1. You email something (one page long) about your idea to a Partner whom you found somewhere on some web page on the Internet.
2. The Partner glances at your email and sees it is in a new space that he has been looking at for a while.
3. He decides to have Kim, the Associate, get more information from you.
4. Kim immediately jumps on the project (one of 99 he is currently working on, 36 hours a day, 8 days per week) and emails you a request for your bplan and "the deck".
5. So what do you do now?
1. You could send him your bplan (if you have one. The chances are you do not. And most likely you do not have a financial forecast of the balance sheet, income statement and cash flow. And you are not sure what "the deck" should be, and you wonder how to value your company to open negotiations with the VC Partner).
2. You could send him an executive summary. But that would reveal a lot of information to a stranger. The VC firm may already have invested or be about to invest in a competitor. Your info will then be used as part of "due diligence" work by the VC prior to investing in your competitor.
3. You could politely email the Associate that "We need to speak with the Partner before revealing further proprietary information." Then on the phone you could investigate any conflicts of interest with the Partner, and you could check him out (to see if he has any hope of understanding your cool idea and if he has what you want in network and contacts to boost your competitive advantage).

I recommend 5.3 at this stage. I have 100% results with deals introduced via Associates: zero money in the bank. I find few others with better track records in this regard. You should speak with a Partner before going further.

Is there a better way to get your money?  Yes, there is. Here is a process that I have found more success with:

1. Research the best VC Partner to work with you for half a decade (to IPO). Find people, Partners, not VC firm. You get money from a Partner, not a firm.
2. Choose 12 VC Partners and rank them top to bottom.
3. Finish your homework: business plan, executive summary, financial forecast and Power Point presentation ("the deck" of PPT slides), Elevator Pitch (30 second and 3 minute versions) and pre-money valuation of your startup (a. the opening offer valuation for negotiations and b. a second valuation, your walk away number). Like the Boy Scouts say it, "Be prepared."
4. Get 100% commitment of your core management team (to come to talk to the VC Partner). That is CEO, VP Business Development, and VP Engineering.
5. Pick the top 6 VC Partners and find people (lawyers, CPAs, entrepreneurs, friends, school alumni) to make a personal introduction to the Top 6 Partners.
6. Get personal introductions to VC Partners. Never contact one of the Top 6 Partners without a personal introduction.
7. Speak to the VP Partner (via the personal introduction) and ask for a date to present to the Partner. That is the purpose of your Elevator Pitch.
8. Keep at least 6 VP Partners active until you have a term sheet (summary of the financing). As soon as one of the Top 6 Partners drops out, substitute one from the remaining list of 12 VC Partners on your long list.
9. Continue until you have 2 or 3 VC Partners eager to offer a term sheet. Get the VCs competing for your deal. Competition is the entrepreneur's best friend.
10. Decide on the one VC Partner with whom you will negotiate a term sheet.

That is how serial entrepreneurs do it. It is the process that is fastest to money (and to the supporting resources that come with the money). There are various hybrid versions of the process, so be wise about how to innovate in your local area, each has its special needs, around the globe, in each country and city.

BOTTOM LINE: Avoid those hard working, well intentioned Associates. Work with Partners. You'll have more success getting your money. You'll be quicker to launch, faster to domination of your new space and more likely to become a gorilla. Understanding and executing this VC raising process is part of your unfair advantage. It is worth the hard work and time it takes to do it right.