1. Will a VC sign an NDA (non-disclosure agreement)? No. If they did they would be in constant violation because VCs often see 3-4+ companies in every market that they operation.  NDAs would make it impossible to do business.   Asking for one to be signed shows naïveté.

2. What is the VC process?

• Meet with one person from the firm – partner or associate.  If you can meet a partner up front it’s always best but sometimes it’s not possible.  The first meeting will often by with an analyst, associate or principal.  Often principals are allowed to do their own deals whereas associates are not.  Associates are good an important people – I discuss this in the video.  Still, “call high” if you can.
• Potentially several other qualifying meetings before you get to meet the other partners if the person you have met is not yet convince / wants to do more work.
• If you make it past this stage you will go to a “full partners meeting” which is exactly what it sounds like.  In the video I describe how to best play this meeting and why, without a champion going into the meeting, you’re unlikely to get an investment.
• After the partners’ meeting you should usually get a pretty good steer on where you’re at in the process.  If you don’t, make sure you follow up and ask for feedback
• If they say yes you get a term sheet and once this is signed it is usually 3-6 weeks until your legal docs get signed and you’re funded.

I was thinking more about my post from yesterday titled Addressing The VC Seed Investor Signaling Problem.  There were a bunch of good comments that caused me to realize that I wrote the post from the perspective of a VC, not an entrepreneur.  As I mulled the comments over, I realized something very specific.

If a VC invests in a seed round but then doesn’t invest in the next round, there is a signaling problem, regardless of what the VC does with their investment.

When I read the post carefully, I realized that I implied that the VC firm’s strategy of selling back their seed investment might address part of the signaling problem.  In hindsight, it doesn’t address this at all.  It addresses a different problem – the free rider problem.

Most investments in a start-up company, from the smallest “seed” financing that may be based on little more than an idea for a start-up, to a $50 million round for a profitable company preparing to go public, is preceded by an entrepreneur standing in a room explaining why venture capitalists should part with their money.

We asked Brian Jacobs, general partner with Emergence Capital Partners, a San Mateo, Calif.-based technology investor that is investing out of a $200 million fund raised in 2007, to take us behind the scenes of a typical company pitch and explain what goes through the mind of an investor as he’s watching and listening.

The slides below are a selection from an actual presentation made by Emergence Capital portfolio company InsideView Inc., a San Francisco-based company selling software that helps salespeople find new clients, improve existing relationships and close deals. The information is customized for each user and is provided through a Web-crawling search engine that finds and filters potentially important sales leads and information from in new social media sites and other emerging data sources. The presentation was shown to new investors, but eventually the company chose to accept the insiders’ investment proposal which resulted in an $11.5 million insider Series B financing in April from Emergence Capital, Rembrandt Venture Partners and Greenhouse Capital Partners. The company has now raised more than $25 million.

We interviewed Jacobs while looking at the slide presentation, which was similar to the one he saw that first spurred his firm to invest in the company. He took us into the mindset of a VC as he decides whether to, as Jacobs says, “give away millions to people we’ve just met.”