I'm reminded daily that growing businesses, no matter how frugal, sooner or later need to raise outside capital.  However, in their rush to complete financing transactions, many entrepreneurs neglect the opportunity to develop relationships with investors and people connected with investors.

Greg Gianforte, the founder and president of RightNow Technologies, used to tell the story of how he raised $20 million of venture capital with a single phone call.  The point of the story was that even a business located in the boondocks could raise capital, if it had the right plan and team.  Missing in Greg's story, however, was that he had spent years assiduously cultivating a relationship with the man who would eventually lead RNT's first round of funding, Roger Evans.  Sure, Greg had to be prepared to deliver a compelling investment proposition, but when the call came, Roger was prepared to listen because he'd come to have confidence in Greg.

Though it helps to have Greg's apparent prescience, I see a lot of low hanging fruit that goes unpicked by entrepreneurs.  A prerequisite to developing a relationship is to strike up a conversation.  A good way to start a conversation is to talk about a topic of interest to the other person.  In the context of capital, it often helps if the initial conversation isn't charged by a focus on a specific transaction.  From the entrepreneur's perspective, it helps to get an understanding of the prospective investor's core interests and values.  On the investor's side, it helps to get a feel for the entrepreneur before passing judgement on his or her business.  Nevertheless, a number of opportunities for conversation are ignored.

For example, in our Dispatches from the Frontier newsletter, we profiled Village Ventures, a company that is creating a network of affiliates in tertiary markets around the country.  Matt Harris, one of Village Venture's co-founders, responded to our newsletter by making an online post.  To-date, not a single entrepreneur has taken the opportunity to engage Matt in an online discussion.

It's true that most such conversations won't result in tangible, transactional results.  Nevertheless, an entrepreneur can increase his or her chances of future financing success by seeking out investors and connectors in a disciplined fashion.  At dinner last week, Rich Karlgaard of Forbes provided John O'Donnell of TechRanch with at least three VC contact names.  And, Rich bought dinner.  That's a pretty good return on John's investment in a conversation.  In turn, it suggests that area entrepreneurs might make a habit of touching base with John from time-to-time.

Karlgaard has expressed an interest in engaging in an online and, possibly a telemeeting, conversation with our broader membership over the coming weeks.  I hope that our members take full advantage of the opportunity.  If they come prepared to help Rich learn, they just might come away with something in return.