Last Thursday, I attended the networking event organized by The Capital Network (TCN) and New England Venture Network (NEVN). There must have been close to 300 attendees at the event, with a good mix of VCs, Angels, and Entrepreneurs, with a smattering of lawyers and accountants. All in all, a fantastic event to catch up with acquaintances from the past and make new contacts.

About halfway through the event, Don Dodge, a serial entrepreneur, angel investor, and member of Microsoft’s emerging business team, gave a short talk on the value of networking in the fundraising process.

Don confirmed what I said in a previous post, i.e., with the potential of being inundated with business plans coming through mail and email, investors must necessarily have some way to filter which new startup they will look at in detail. And that filter is usually a warm introduction to the startup (by a colleague or friend), or positive personal contact with someone at the startup. Hence the need to not only network, but to be prepared with an elevator pitch to catch their attention.

In his closing remarks, he said something that struck a chord with the entrepreneurs in the room. He asked everyone in the room to think about their stock portfolio and think about why they invested in those particular companies, out of thousands of others. That is, why did you invest in just 1% to 5% of the market?

VC and Angel investors are no different — out of the entire universe of businesses that they see, they invest in perhaps just 1% to 5% of the ideas which they think will make them money, whether because of technological superiority, market leadership, or a belief that it is the next big thing.

As you are going around seeking funding, you need to make sure you can position your company as one of the top 5% of startups.

So, are you in the top 5%?

© Eye on Startups & The Startup Guidebook