Question: Our company is trying to close series A funding of approx. $1M by April 30. VC’s we have spoken to say the amount is too small and to contact them at B/Mezzanine stage? What does this mean? Are there options for us?
Our Take: The reason you are having trouble raising that amount of money from VCs, is because it is too small. VCs have limited bandwidth and large funds. In order for them to take time to complete due diligence and spend going-forward cycles advising you, they need to put a bigger piece of capital to work. In other words, when you have a $200M dollar fund (or much larger in some cases) a $1M investment doesn’t “move the needle” enough to justify the effort.
Your options are to seek angel funding, or find a VC that does seed deals. Charles River Ventures recently announced a new seed program called Quick Start. As for more information on Angel Deals, we will address much of this process in an upcoming series of posts.