For many technology entrepreneurs, raising venture capital is an important part of their business strategy and may be a goal in and of itself.  As a result, I’m often asked: “What are my chances of being able to raise money from venture capitalists?”

Obviously, I’m not a venture capitalist (we lawyers, don’t pretend to know what exactly a venture capitalist is looking for and what they will require before making an investment).  However, you start to get a fairly decent sense of what a VC won’t fund.  I’ll save that list for another post and another time…

So my general answer to that question about whether or not an entrepreneur could raise VC funds is: it depends. It depends on the team you’ve assembled, the technology itself, the market for your technology, the right timing, and a little bit of luck. And while that may be the case, if you believe Sam Altman, the founder of Loopt, “If you’ve got a good idea, market, and team, raising money won’t be your problem.”

So, what are the odds then?

The truth is, the “it depends” answer isn’t very satisfying to most people. Entrepreneurs want to know their chances.  In a prior post, I wrote about the VC “Fit” Test.  That is one way to gauge if you may be a good fit or not (although, again, lots of subjectivity there).  The other way to gauge interest is to sit down with a few partners at funds and see the reaction (but that means you can get those meetings or are far enough along for them to be truly interested).

So, what about some more data into the chances of an unnamed startup?  Well, anecdotal evidence suggests that between two and three percent of businesses seeking venture capital financing will ever receive institutional funding. The majority of these cases are because venture funding is not the right type of funding for the business (not passing the VC “Fit” Test….). Sean Wise looked further and interviewed a number of venture capitalists to find out where their deal flow came from and the sources of deal flow that had the highest probability of closing. While these are not scientific numbers, these figures should offer some insights into the way VCs see the sources of their deals.

What are the odds of getting a meeting with a VC firm based on:

• an unsolicited business plan submission? Approximately 1 out of 100.
• a solicitation from an unknown agent? Approximately 1 out of 50.
• direct contact from venture fairs, financing forums, and other industry events? Approximately 1 out of 15.
• referral from professionals with fund relationships (accountants, lawyers, and market dealers)? Approximately 1 out of 3.
• referral from current and future investors? Approximately 1 out of 2.
• referral from executives of a portfolio company in the VC’s fund or other stakeholder in the VC’s funds? Nearly 1 out of 1.

Even getting an initial face-to-face meeting with a venture capitalist only represents the first in a long series of events. An initial meeting will likely be followed by a second meeting, perhaps with other members of the venture firm. Due diligence, company visits, and meetings with other company management team members will be the next phase, with a formal presentation to the firm partners following what could be several months of discussions, meetings, and presentations. And, unfortunately for the companies, at each of these points in the transaction, the venture capital firm may find a reason not to continue the investment process with the company. The information from Sean Wise also suggests that getting a meeting with the venture capital firm is only the first step toward closing the deal.

What are the odds of a deal getting done based on a solicitation from:

• an unsolicited business plan submission? Approximately 1 out of 1000.
• a solicitation from an unknown agent? Approximately 1 out of 100.
• direct contact from venture fairs, financing forums, and other industry events? Approximately 1 out of 20 (much higher if the company wins the competition).
• referral from professionals with fund relationships (accountants, lawyers, and market dealers)? Approximately 1 out of 5.
• referral from current and future investors? Approximately 1 out of 3.
• referral from executive of a portfolio company in the VC’s fund or other stakeholder in the VC’s funds? Approximately 1 out of 3.

Keep in mind — these aren’t hard and fast statistics, many of these figures are based on research and discussions only.  So just because you get that referral from the CEO of a portfolio company, don’t start counting down the days until the wires will clear from your venture round.  Much more goes into the decision of whether or not to invest, and every case is different.

* Portions of this article are from my book What Every Engineer Should Know About Starting a High-Tech Business Venture, available now.