One of the major channels to obtain funding for your start is Venture Capital (VC) firms. Apart from offering capital, VCs also give strategic planning aid, connections to prospective customers, partners and employees. The process involved in obtaining venture capital is a bit detailed, and it is advisable to take time and understand it before you engage a VC firm.
What Does Venture Capital Financing Focus On?
Venture capitalists select their investments based on specialization of an industry sector and the products or services it offers. They also consider the stage of a company- is it a startup or at a later stage where it has already started gaining stability and has numerous customers?
Besides, the location of the business is considered due to factors such as financing rules and regulations, business licensing and taxation. Ensure that the venture capitalist has a similar interest to yours in terms of business startup and its level of development before you plan to meet them.
Extensive Research
Carry out detailed research of VC firms that you want to work with. Choose a few that are offering the amount you need, those that are in your niche and are okay with your stage of development. They should be located in your region of course! Most VC firms have websites that announce the types of startups they deal with. So pop in to see whether you have common interests.
Avoid Bulk Emailing
Serious investors are repelled by emails, summary memos, business plans, and watch pitches which give the impression that they are sent in bulk to numerous investors. If you want to catch the attention of a serious investor, take a step and approach them through a trusted friend or associate. Once you get a connection, present your business plan and explain all the details.
Approach One VC firm at a Time
This step requires extra patience. Talk to people who are close to the investors, for instance, business associates, alumni relations, business people who have previously partnered with them and monitor their public address forums. Be diligent enough to ensure that you have a one on one interaction with the investor during their regular schedules. Another way to reach out to them is submitting through their website forms or call their personnel.
Have a Presentable Business Plan
See to it that your business plan is ready before you complete the summary or pitch. The business plan is the essential part of your startup since it gives an overall idea of what the business is all about. The business plan should not be too big nor too formal neither should it be older than a month.
Venture Capital Term Sheet
The VC term sheet is a document which is produced by the firm and presented to you. It has details that indicate the investor is serious about working with you and wants to finalize all financial and legal documents to facilitate the investment. Before issuing a term sheet, most firms seek a go-ahead from their investment committees. Once the term sheet has been finalized and signed, you are assured of financial backing.
Do not be afraid to approach venture capitalists for funding since the guidelines discussed above will secure you a high chance of success in your startup plan. All you need is do your research and find the right investors to talk to for business funding.
Failure to get proper funding for business has a significant negative impact on a business and the founder. Many dreams fail to come true because the founder does not have money. Source funding from ventures and grow into a famous company.