So you’ve got a great business idea and need some money to get going? Venture capital could be just the solution you’re looking for…if you know how to approach investors the right way. Get a crash course in venture capital basics in the following points.
Who – Venture capitalist firms collect funds from rich investors who want to see their money grow. Typically, a venture capital firm will invest the joint fund into various business models, many of which will fail. Some of them will end up succeeding and turning a profit. However, the venture capital firm selects investments carefully to choose companies that are likely to go public and make them a profit. They are playing the law of averages, but select very carefully based on your company’s potential.
What – Venture capital firms come in all shapes and sizes. Most will specialize in a few specific industries, like telecommunications or construction. Make sure you find and connect with the right type of venture capital firm for the best results.
Where – Venture capital investors are best found through direct contacts to the firm in your local area or based on professional connections that you have. Drop an email to ask for a meeting. If you don’t have a direct contact, try asking friends, your lawyer, accountant, neighbors and other entrepreneurs if they know anyone in the firms you’d like to get in touch with. Have them send an introductory email on your behalf so you can make the connection.
When – Venture capitalists do not, as a general rule, invest in start ups. You shouldn’t start searching for venture capital until you need money to grow and have a track record of the business getting off the ground. You should be well established in your niche market, be profitable and have a track record of growth. Trying to gain venture capital before your company is ready is an exercise in futility.
How – There is a several step process to securing venture capital. First, you need to come up with a one to two page executive summary of your business. Alternatively, you can put together a powerpoint presentation to explain your business concept, of no more than 10 slides. The slideshow should include:
- your mission statement
- your team
- the problem your company will solve
- how your company will solve the problem
- your competition
- your market size
- your business model
- your proposed marketing plan
- your necessary financing
- your projected milestones
Once your presentation is in place, you can start looking for firms. Pick from two to eight venture firms that you’d like to target for investments. Use your contacts to get in touch with someone in the firm and try to get a direct meeting. Send your presentation or executive summary to the firm a few weeks before the meeting, and present it again during the meeting itself. Be prepared to answer lots of questions about your need for financing, and if you handle them correctly, you’ll be on your way to getting the financing you need.
Research Analyst, Pacific Workplaces
Courtney’s research for Pacific Workplaces focuses on tracking emerging business trends and best practices – with an emphasis on how they affect business operations, technology, and office space infrastructure.