Armed with an understanding of what VCs are looking for, an entrepreneur is pre¬pared to begin the search for a company that meets his or her needs. Because the venture capital community is fairly close-knit, at least within regions of the country, it is wise not to "shop" the business plan around looking for the best deal. It is impor¬tant to do some research on the local venture capital firms to determine whether any specialize in die particular industry or type of business that the entrepreneur is grow¬ing. Getting recommendations from attorneys and accountants who regularly deal with business investments is an excellent way to find these VC firms. In fact, the best way to approach venture capitalists is through a referral from someone who knows the VC. Because VC funding is usually later-stage funding, it is likely that entrepreneurs seeking this type of funding have already tapped the angel investor network (see Chapter 16). In fact, new ventures diat have successfully navigated through angel investor screenings and mentoring are typically is a more valuable position when they are introduced to the VC firm that can provide them their next round of capital. Angel networks work closely with die VC firms in dieir region, so they understand their strict requirements and can help prepare the new venture to meet those requirements.
The venture capital firm will no doubt ask for a copy of the entrepreneur's busi¬ness plan with an executive summary. The executive summary is a screening device—if it can't be immediately determined that the entrepreneurial team's qualifications are outstanding, the product concept innovative, and the projections for growth realistic, the VCs will not bother to read the rest of the business plan. On the other hand, if they like what they see in the plan, they will probably request a meeting to determine whether the management team can deliver what they project. This may or may not call for a formal presentation of the business by the entrepreneur. During this meeting, the initial terms of an agreement may be discussed in a general sense, but it will probably take several meetings before a term sheet is delivered. The term sheet is