- December 12, 2021
- Posted by: Robert Brown
- Category: Investing
An effective way to receive the venture capital that you need is by selling your business to the venture capital (VC) firms. But of course, you should never approach those venture capitalists empty handed. Keep in mind that VC firms will have to evaluate the viability of your business, first based on your business plan and second from your business pitch. More importantly, VCS are more likely to venture with you if they see these four important qualities in your business: disruptive technology, potential for fast growth, well-rounded business model, and top performing management team.
Supposed that you have managed to meet those four qualification criteria, your next task is to curate the negotiation process between your company and the VC firm. Present your business plan putting more emphasis on the profit generation aspect. Also remember that VCs would only give you that venture capital fund if you are going to share with them a slice of the pie – or a percentage of your equity. Therefore, you have to be wary of the terms and conditions being proposed by the VC firm for that could affect your control over your business in the long run.
The rule of the VCs is simple: If you accept our offer, you can have that venture capital fund. Your goal should be simple as well: Receive a good offer. And to achieve it, here are the important matters that you need to prepare.
Write your business plan well.
Starting a business is difficult but so is writing a business plan. All the transactions, events, projections, assumptions, and SWOT of your business, you need to put them in writing in such a way that it would convince the VCs to seed money. VCs want their money back doubled, tripled or more in the span of 3 to 7 years. Knowing this, you have to show on your financial projections that you can at least break-even within the first or second year. The rest in your business plan is proving them that your business is worth the investment.
Justify your Capital Spending Plan and their Return on Investment (ROI).
While these money matters are already discussed in the business plan, VCs would want to hear you stating the same facts and figures in your ten minute business pitch. Expect drill-down questions like “Why three years for that ROI, why not two?” or be ready to give your best explanation when they tell you “What you’re asking is too much (or too little).” If you want to receive that venture capital, you have to be bold on your financial bets.
Focus on the growth of your business so they could find you.
Venture capital is a big industry. Venture capital funds are raised by venture capital firms from wealthy individuals, companies and private investors. Today, major players in this market don’t stop looking for startups and small businesses that could give them high returns. If they see your business selling high, they will approach you to offer the venture capital funds. So idea here is this: Make your business shine so that the VCs could easily find and back you.
Sell your business with full confidence.
A real entrepreneur knows his business more than anybody else. Whether you’re a startup or a company ready to launch your IPO next month, you can receive that venture capital if you will sell your business with high level of entrepreneurial skills. Once you’re in front of the VCs, consider it your first and last pitch. So give it all your best to get their best venture capital offer.