Should Companies Solicit Multiple VCs, or Just One While Fundraising?

Question: If you found out that a startup who approached you was soliciting funding from other sources, would you be less likely to invest in the opportunity? Would you encourage or discourage new startups to negotiate a better deal by looking for more than one VC?

Our Take: As much as we’d like all our potential good deals only like to speak to us, it’s clearly the right decision to speak to as many VCs as possible. First, most VCs will offer you some good, free advice on your venture. Secondly, you’ll begin to develop an opinion about who you’d like to work with. Remember, you aren’t getting just capital from a VC, but a business partner as well. Lastly, competitive pressure for your deal will help you drive a better deal.

In short, you are a smart businessperson to look at your options. We could never fault you or be discouraged from investing by you doing so.