So, what has happened? Well I had a baby, that sort of ate up a few months of my time. Back on track now, we’ve been noodling through some new venture ideas lately, with the hope of acquiring investors to fund them. This has thrown me back into the “To Get VC or Not” journey. As I mentioned in my last post, our structure and approach is a bit unorthodox, coming at ventures with an established team and business, with the hope of building out not just one great idea, but many. It’s not a model that you really see, so instead of wasting my time and anyone else’s time moving in this direction, I made a really good decision. I asked for some advice.

I decided to reach out to some of the connections that I’ve built up over the past six years and ask some pointed questions on what could work and what definitely won’t work when it comes to attracting investors. I had the opportunity to connect with a former client, who also happened to be a serial entrepreneur, tech start-up CEO and angel investor based in Silicon Valley. He was gracious enough to answer some of my questions and offer some valued advice.

Question: Is our multi-project model something that would be appealing to the average investor?
Answer: Here in Silicon Valley, no.

Plain and simple the model that we were aiming for just isn’t a great starting point, and there’s no point trying to fit a square peg into a round hole and selling an arrangement that is too far outside of the norm. The reason? Investors are not looking for consistent income from an investment. They are wealthy people looking for rapid growth, the potential to sell or bring a concept public, and receive a sizeable return on their investment. Coming to them with ten ideas is less compelling than coming to them with one really good idea that both you and they can get behind fully.

Question: How do we build out some of our unique ideas, with or without funding?
Answer: Make time to build out the initial concept yourself. If you won’t take a second mortgage out on your house to fund a project, why should your investor?

Basically, do basic market research. Throw a landing page out there and see what type of traffic you get from an ad campaign. If that looks promising, go a step further and launch a scaled down demo, without all the bells and whistles, and see if the concept has legs. Once it does, put enough into it to show six months of rapid growth. THEN start shopping it. A start-up is not unlike a house. The more features you add to it, the more work you put in, the more equity you are adding to your asset. It’s a lot harder to sell a blueprint for a house, than one that is move-in ready.

Question: How does our business evolve once one of these projects takes off?
Answer: Best case scenario is probably a “spin-off.”

A spin-off is when one facet of a company begins to grow rapidly enough, draining significant resources from the main operations of the company, that a separate entity needs to be created. The options are to refocus the main operations of the company to this very successful facet, spin it off into its own company with its own team, or kill it so it stops draining your resources. Well, it’d be a shame to bury a perfectly good idea, so when building out our side projects, we’ll be keeping in mind the team that we build around it and send off with it if it gets to a point where it needs to exist as an entity separate from Pearse Street.

Question: Where is the best place to look for angel investors?
Answer: In your local area.

Getting investors is so much more than writing a business plan. In fact when I asked about what people will really be interested in, in terms of documentation, I was told basically a solid paragraph. This absolutely does not surprise me. If I was an angel investor, the last thing I would want to spend my days doing would be reading 50 page business plans. Give me the elevator pitch! And ultimately, people invest not just in ideas, but people. People they trust, people who inspire them, people who they can trust with their second mortgage.

By the end of the call, my thought process on approaching venture capital had completely changed. The model that I had in my head seemed a lot better in my head. As much as I’d love to get a big check to start building out my dream social networks, I understand more than ever that I need to buckle down and make time to invest in them myself. If they grow the way I’m confident that they will, the sites will sell themselves with significantly less effort.

His best advice? “When you ask for money, you’ll get advice. When you ask for advice, you’ll get money.” Good to know!

I’ll be the first one to admit that I don’t know all that much about VC or the process of acquiring it, so I figured that I might as well share a little about my experience as I learn how to navigate through this community. Even though the chances of women CEOs getting VC are increasingly slim, I like beating the odds, so hopefully this series doesn’t end with, “Giving up on Venture Capital Quest: Part 27.”

To date, my experiences with VC have primarily been through various clients. Typically clients come to us with an idea for a unique social network, and some who treat the project as a serious investment often supplement their own monies with third-party funding in the form of venture capital. This funding might be secured at the onset of the project, partially through the development, or after the site has launched and proven itself to its community and potential investors. We rarely if ever connect directly with clients’ investors, but indirectly, we contribute to the process of securing funding pretty significantly, if that is in the form of a prototype or demo, a fully functioning network, or very early on through a detailed design and development plan that goes into the clients’ business plan.

We do this legwork to help our clients secure funding, some of which (hopefully) funnels our way for the creation of the site. At some point we realized that this is also an avenue that our company could explore. We have all the necessary ingredients that VCs apparently look for: an established management team, a prototype (social network software), and several solid concepts to pursue. On top of this we have the design talent, the technical know-how and the business sense to successfully create and grow a website business.

Because we are building social networks for our clients daily and we are tuned into the fast-changing trends of working with social media, we have an especially acute perspective of this high-growth industry. Prospective clients come to us daily with good ideas and bad ideas, and at this stage, we have a honed sense of what makes a strong concept worth developing. Unfortunately we lack the time and resources to grow each of these independent concepts and projects to their fullest potential, many of which we feel hold significant long-term promise.

We are not looking for investors for Pearse Street, which sustains itself well at this point, but for new projects that are conceptualized and in some cases already designed and developed by our team internally. Every year we allocate a certain amount of funds to building out these “internal projects” that could ultimately spin off into their own businesses, but have limited time and funds to properly grow them to their fullest potential.

So! The model that we’re looking for is a little unorthodox to start with, which is one of the first challenges. I am attempting to circumvent the usual process of randomly submitted a single business plan to one of hundreds of VC websites. I’ve only reached out via email to about 20 firms, primarily in the New England area. I have a feeling with the economic crunch, this method probably isn’t going to yield many results, but I have more up my sleeve. Next step: networking!

Fill an Untapped Niche in the Social Networking World. If you’re anything like me, you have periodic revelations about something that you’re certain hasn’t been done yet. And if you are me, you immediately think about how you can fill the void through a social network of some sort. Like Twitter but only for sports fans! A community for Twilight-obsessed moms! A network to connect tattoo enthusiasts with tattoo artists! While social networks have really become commonplace in our lives the past few years, there is still plenty of opportunity to fill a void. I will say that the chances are low that any run-of-the-mill idea can compete with social networks giants like Facebook, Twitter or LinkedIn. These networks target a very general and broad audience. Websites that target specific niche communities, serving the needs of that particular group, I feel have a fighting chance of gaining momentum. If successful, they could have a chance of achieving more broad appeal. Facebook, for example, was originally built for college and university students. MySpace was primarily for musicians. Both evolved from serving a specific niche community to serving literally millions of users from all over the globe, including numerous corporate giants who now use these networks as must-have microsites for their brands.

My advice? Take your idea, identify potential target audiences as specifically as you can, research competing sites and find out how you can best serve that group with the most useful tools. What if there are other tattoo networks, for example? Don’t be discouraged. If there are others competing in this market, it’s typically a good sign. It means that there actually is a market. You just need to find out how to make your concept better: more unique, more useful, more visually-appealing and valuable enough to attract the lion’s share of the market.

Hobby & Theme Sites. The vast world of fandom and all its marketing potential dawned on me when I fell deeply in love with the Twilight series, joining myself with millions of other seriously obsessed Twi-hards. I needed a place to talk about all these new feelings and ideas and sometimes just gush about Team Edward nothingness to others who would truly understand! I discovered other websites with valuable Twilight information, I read blogs that posted up-to-date Twilight news, and I followed all of the cast members on Twitter. I soon learned that there were others like me… many others. My hairdresser, my sisters-in-law, my coworkers, random people on the street whose conversations I overheard. There was clearly a need for a community, so we set to work creating TwilightDisorder (because let’s face it, this kind of obsession just isn’t normal), and in the process realized that a huge demographic of this fan base identified themselves as Twi-moms. Hot-blooded women with children and draining careers and humdrum relationships for whom the romance of the story really resonated. This was our niche market, and it would be one of the things that set our site apart from others like it.

The Twilight fan community is of course only one of many. Film, music, sports and recreation regularly take us out of our daily lives, into an entertaining world outside of our own. Everyone is fan of something. The only question being, has that community been thoroughly and effectively tapped yet?

Investment Opportunities. Nevermind personal interest and the conceptual intrigue, it’s hard to argue against the benefits of investing in social media. According to The Neilson Company, global consumers increased the amount of time they spent on social networking sites by 82% in December 2009 compared to December 2008. Think about how many people you know who have surrendered themselves to Facebook and Twitter accounts this year. Social networks are fast evolving from the “trend” to the “norm.” Before long, it will simply be the way people interact online, and businesses and their websites will be expected to have some social element to their Web presence.

In fact, despite tight budgets in this economic crunch, there are still venture capitalists and firms looking for new opportunities and are investing heavily in high-tech start-ups. Granted, most will be looking for multiple criteria to take such a risk, such as an established team and board of directors, a prototype or semi-functional demo if not a fully underway site, and the usual business plans, business models, etc. It’s even feasible to get investors on board with the idea alone. It’s a harder sell, but if the idea is revolutionary enough and the team behind it strong enough, I know first hand that it can be done!

Can you successfully pitch your idea to an investor, and do you have the ability to follow through with the network as a business?

Building a Community for your Existing Business. Ever think that you or your business could be the impetus for creating a community? Even if you build a community that isn’t necessarily centered around you specifically, you could easily position yourself as an expert in the field by creating a community for your industry and providing legitimate tools that, based on your specific experience, you know will be useful to others like you. What better way to network, learn and grow than by providing a digital meeting place for others in your industry?

Alternatively, a social network that allows you to connect with the outside world of unknown connections-to-be could just as easily serve as an intranet of sorts, connecting you with a community that already exists in real life. A medium to large sized business, an artist with a growing fan base, or an educational institution would all be candidates for establishing a network for their specific “real world” communities to connect online for the purposes of disseminating information or communicating more effectively. Share group-specific news, events, or bridge the gap between members in remote locations.

Simply ask yourself who you would ideally like to connect with in an ideal community, and what keeps you from being able to do that on the communities that you participate in now?

Building a social network of course is so much more than the idea generation that marks its birth, but that seedling of a concept is what will set you down the path of success or failure. Believe in your idea, find the facts to back up why others should too and let the journey begin!