This is part of my series on Raising Venture Capital.
I’m sure I’ll spark the ire of some VC’s for saying so, but there is certainly such a thing as black-out days in venture capital. It’s worth you knowing this so you don’t waste your time. It’s also very important to understand so that you can properly plan when you raise money.
Let me first tell you the black-out periods and then I’ll explain why. It is very difficult to raising venture capital between November 15 – January 7th. It is also very hard to raise VC from July 15 – September 7th. (you need to have had your first meeting even earlier.) If you’re thinking about raising VC and have not yet started the process, you’ve probably already missed the boat for 2009.
If you’ve had your first partner meeting but haven’t had the full partner meeting then you had better schedule it for Monday, November 23rd. Full partner meetings are almost always on Mondays and if it isn’t already booked yet for Monday, November 16th (e.g. this coming Monday) obviously that’s not going to happen. If your VC is reluctant to schedule the partner meeting by the 23rd it’s a clear signal that they want to wait until the new year (or they aren’t committed to your deal).
So why is Funding Season over for the rest of the year? The VC process is almost universal in how it works across firms. You meet an initial person from a firm – an associate, a principal or a partner. If it’s one of the first two you’ll probably meet a single partner before coming into a full partner meeting where (by definition) all of the partners will be in attendance.
It’s true that some VC’s will work a few days of Thanksgiving week and many will work the first 2 weeks of December. But the problem is that trying to get enough of the partners to be at a full partners meeting during Thanksgiving week or in December is very difficult. Because almost all VC’s know this, many are reluctant to even start the process with you.
The same thing happens beginning in the middle of July. Many VC partners take 2-3 (4?) weeks off in August. I know that many VCs also work in August so I’m not making any commentary about work ethics. But enough take vacation that organizing full partner meetings proves difficult.
Maybe it’s partially because many entrepreneurs are pre-kids and many VC’s are post kids that VCs take off large blocks of time in the Summer? Who knows – but trust me (regardless of what anyone tells you) it’s a true phenomenon.
Note that Jeff Bussgang says that VC’s work in August and he’s right. VC’s are never really “off.” Just like entrepreneurs they take calls from vacations, do board calls, handle company emergencies and urgent financings. Jeff argues that his firm has done the most deals in August in the 7 years since he’s been a VC. I’m betting these processes started much earlier and his firm was just finalizing what had been previously agreed during Funding Season. Maybe I’m wrong but if I am I’m telling you in my experience his firm is the exception.
One carve out to the “Funding Season” rule – if you’re raising money from angels or small VCs (2-3 partners) maybe you can get something done as you don’t have the same scheduling conflicts.
But by and large I encourage entrepreneurs who are raising money to focus on the following time periods to START your process:
- January 6 – May 15th (green zone)
- May 16th – June 30th (yellow zone)
- July 1st – September 7th (red zone)
- September 8th – October 15th (green zone)
- October 16th – October 31st (yellow zone)
- November 1st – January 7th (red zone)
Please don’t shoot the messenger in the comments, I’m just tellin’ it how it is. And if VC’s are telling you otherwise, when they’re done with your funding documents I’m sure they’ll also tell you, “the check is in the mail.”
UPDATE: As accurately pointed out in the comments, I advocate building relationships with VCs year round. It is always best to know your VC well before you really need money (in the same way you’d historically want to know your local banker). My guide to VC relationships if you haven’t read it.
UPDATE 2: Yes, this is US centric. In Europe funding season is longer into November but much, much shorter in the Summer! (I know, I lived there for 11 years). Any views on funding season in Asia?