STICK WITH IT
Boston VC firm Romulus Capital has a few lessons for Pittsburgh entrepreneurs
Stepone: Get ghosted — in otherwords, ignored — by a venturecapital firm that you’ve met within hopes of securing cash.
Step two: Panic that it’s not interested.
Step three: Send a follow-up message after three or four days of radio silence.
Step four: Wait, then send a thank-you note anyway, and ask for feedback.
A failed attempt at securing a Series A or Series B round of venture backing doesn’t mean you’re dead to that firm you’ve met with, explains Joey Kim, an associate at Romulus Capital, an early stage venture capital firm in Cambridge, Mass.
“VCs will never say no forever,” he told a gathering of entrepreneurs Thursday morning at an Alloy 26 event in the North Side hosted by Pittsburgh Technology Council.
While Romulus typically invests in startups headquartered at the usual suspects — Silicon Valley, Boston and New York are all represented in its portfolio — Mr. Kim is visiting Pittsburgh as part of his own nationwide tour to check out technology hubs with vast engineering talent but what he considers an underserved capital-raising environment.
He is also eyeing Atlanta; Detroit; Austin, Texas; and Dallas. Notably, all except Detroit are cities on the short list for Amazon’s HQ2, a second headquarters that the Seattle e-commerce giant plans to build.
“Ibelieve that wherever there’s engineering talent, there’s entrepreneurial talent regardless of capital formation,” Mr.Kim wrote in an email.
Securing funding can be burdensome for local startups. Venture capitalists, seed investors and entrepreneurs quarrel over whether Pittsburgh has a deeply entrenched “valley of death,” or a chasm between seed funding rounds and Series A venture capital.
Mr. Kim focused his conversation on the side of funding negotiations that entrepreneurs typically don’t see: the perspective of the venture capitalist.
He broke down venture firms into two categories of employees, because terms such as “associate” and “partner” mean different things at different companies.
What he calls a “detective” is
the person that a startup will likely meet first. Detectives are in charge of due diligence and gathering data to build a case for their superiors to want to work with the startup. Classically, this might be an associate. They have incentive to help a startup because their reputation is on the line.
The “advocates” are normally higher ranking partners at a venture capital firm. Mr. Kim said if you haven’t met with one of these people face-to-face after two or three conversations with a detective, the venture capital firm probably isn’t interested in a deal at this time.
“When they say, ‘It’s a pass for us,’ it’s really just a pass for now,” he said.
More than once he has seen a company that his firm didn’t cut a deal with find funding elsewhere just a few months later. And because Romulus, or whatever venture firm a startup is working with, has seen the company’s name and interacted with them before, that human connection makes it easier to try again.
“It gives you a leg up so you don’t have to start from scratch again later ... so stay in touch for the next round,” Mr. Kim said.
Rich Lunak, president and CEO of North Sidebased Innovation Works, the region’s most active seed investor, said building relationships with outside investors — including not only venture firms, but also angel networks and other funds — is part of the key to ensuring the success of Pittsburgh’s early stage startups.
He confirmed that Mr. Kim would be screening between eight and 10 companies at Innovation Works during his Pittsburgh visit, each lasting about a halfhour.
“That might lead to an investment, that might not,” he said. “But they can stay in touch.”
Innovation Works first connected with Mr. Kim in May. He had cold-emailed chief innovation officer Gary Glausser, writing that Romulus was shifting its focus toward underserved ecosystems and was looking to find a point of contact in Pittsburgh.
That proves Pittsburgh is on the map for outside investors, Mr. Lunak said.
“When we started doing outreach years ago, it was a lot more of presenting ‘Pittsburgh 101’ to investors that were unfamiliar with our region,” he said.
“Today, the city has such a different and more respected reputation that they’re really excited to learn more about it and likely know of some companies here in town.”