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April 9, 2008 2:11 PM

Do I Pick A Venture Capitalist Based On Money or Guidance?

Q:  I self-financed and run a profitable Internet based start-up with more customers than I can handle. I can take the business to where it needs to be without outside funding. However, it will take much longer to grow organically. I've considered working with financiers for guidance and capital.

What is the best route to take?  I'm in a position where I have several VCs interested and their terms are different.  Do I go with no money?  The best money terms?  the best guidance?

A:  (Jason).  Venture Capitalists bring 4 types of "capital" to any transaction:  Monetary, Social, Interpersonal and Experience. 

Monetary is simply money - a checkbook, if you will.  Social is the network and connections that a good VC can bring to the table.  Interpersonal is the capital that VCs bring that allow them to mentor their investment executives.  It also helps them to be helpful board members.  Experience is just that- having been there and "done that" time and time again. 

The question to ask yourself is which of these types of capital you need more?  Is it all about the money, or do you really need help that you don't have inside the company?  And which one of your potential VC suitors do you find better equipped to provide this non-monetary capital? 

We've found that many of the companies we invest in are more interested in the non-monetary capital that we can bring to the table and we are quite proud of that fact. 

Posted in: | Posted by: Jason Mendelson
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