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Seal the Deal: Four Ways to Ensure that You’ll Get That VC Funding

It might seem easy, but the reality is that very few startups actually get financial support from venture capitalists. In Silicon Valley, for instance, only 0.3 percent – or one in every 300 startups – receives that highly sought after funding. This is the truth, and if you are one of these hopefuls, you might want to start improving your performance to ensure that you will be the chosen one.

This article does not focus on giving usual advices that urge you to be the top performer, the cream of the crop, and the best of the best – these are very obvious things that you should already be aware of. Instead, this piece will provide you with four important tips and reminders that might help you seal the deal with your potential founders.

TIP 1: Know What You Need

Before submitting a proposal to venture capitalists, it is your duty to know all the things that you are asking for from your potential founders. How much money do you need? Is the amount that you are asking for enough to support the startup? Where will you specifically allot the money that you will get? What will the VC get in exchange of the financial support that they will give you? What will be the status of your market outbound once you receive the funding?

These are just some of the things that you should be familiar with, and the list of questions goes on and on. As the owner of the startup, you should be able to answer every possible question that venture capitalists might ask about your proposal.

TIP 2: Know What You Are Doing

Impressing your potential investors is perhaps the most important things that you should do if you want to receive financial support from venture capitalists. And how can you impress them if you cannot clearly explain the concept, objectives and other significant details about your company? As the owner, you are expected to familiar not just with the strengths, but also weaknesses and challenges that your startup is facing. This will help you when you present your pitch before your potential founders.

TIP 3: Persistence is the Key

In this kind of game, time is usually not on the side of the entrepreneur. Venture capitalists have the power to act on your proposal on whatever speed that they like. They might decide to immediately discuss your pitch among themselves or hold it for as long they want due to any type of reason that they may come up with. There is nothing much that you can do at point – that is, unless you decide that you want to give them a deadline. This might work, but you must be sure that your proposal is good enough that your potential investors would bother following the timeframe that you imposed on them.

If you do not want this suggestion, then there’s nothing that you can do but to persevere in following up your proposal. Do not be ashamed to check the status of your pitch – there’s nothing wrong about that. Just make sure that you do not nag, pester or badger your potential funders.

TIP 4: Choose your Battles

Discussing the term sheet is a serious pain in the neck. Definitely, there will be disagreements on the terms and conditions that your investors would want to enforce. You should know when to hold your ground or give in to their requests. There’s no point arguing just for the sake of argument. It would lead to a disaster. Know how to choose your battles. Too much argument may lead to a bitter relationship between you and your investors. Or worse, you might end up losing an important deal.

Venture capitalists are not different from your friends, family, and business partners who have heard you talk about your startup. They are also people. And like the rest of us, they will listen to you as long as you provide them with honest and interesting information. You do not have to use out of this world statements to amaze them. All you have to do is to give them an honest proposal that is worthy of their attention.

 

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

 

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Attracting Venture Capitalist

Attracting Venture Capitalist

A venture capitalist is a person who invests in a business venture, providing capital for start-up or expansion. Venture capitalists are looking for a higher rate of return than would be given by more traditional investments. Venture capital was once known also as risk capital, but that term has fallen out of usage, probably because investors don’t like to see the words “risk” and “capital” in close conjunction. Most venture capitalists are looking for a profit of 25 percent and up. In other words, the venture capitalist may have no business experience applicable to the industry your company is involved in, and is focused on the potential rate of return your company can provide. Venture capitalist prefers to invest in entrepreneurial businesses. This does not necessarily mean small of new businesses. Rather, it is more about the investments aspirations and potential growth. Such businesses are aiming to grow rapidly to a significant size. As a rule of thumb, unless a business can offer the prospect of significant growth within five years, it is unlikely to be of interest to a venture capital firm.

There are some key points that venture capitalist look for in a business. First is your management team, it plays a vital role especially in a start up business. VCs looks into how your team manages east to difficult situation. Venture capitalists assess the strength of a management team by examining the members from three different perspectives. Venture capitalists look for professional experience. People who have a very good track record, every startup should have a marketing and operational executive. VCs also looks for admirable personal traits in the entrepreneurs such as reliability, reputation, trustworthiness, etc. VCs would like to deal with entrepreneurs who have established credibility within the industry. Venture capitalists generally tend to invest in entrepreneurs whose reputation can be verified. And lastly, VCs look for entrepreneurial abilities in the team. Heading a startups is difficult than heading a large organization it’s because of the limited resources most startup have. Management team should not only be extremely passionate and willing to persevere about an idea, but also have the ability to take a calculated risk.

Second is competitive advantage, startup corresponds to the possession of rare core competencies that creates value to customers. A company has a competitive advantage if competitors cannot easily imitate their core competences. Competitive advantage is the company’s unique specialty that no other has. VCs look at the competitive advantage a startup has before they determine the startup’s growth potential. Every entrepreneur should articulate the competitive advantage of his/her business idea before approaching investors.

Third, VCs looks for the company’s potential to the market, it defines the total sales that the startup can eventually make. The market potential really depends on the market size, market needs, and market penetrability. Market needs describes the problem the startup intends to solve. Market size describes the quantity or size of the sales opportunity for the business. Market penetrability only tells how easy it is to make sales and generates revenues. It tells marketing efforts that the startup needs to exert before it penetrates into the market. Venture capitalists closely look at the market potential for a startup idea before they decide to fund the idea. Entrepreneurs should focus on clearly defining the market before approaching investors.

Fourth is Exit Strategy, startup should also initially plan for a strategy of “cashing in” on their company allowing VCs to liquidate their shares. VCs prefers either IPO or acquisition as their exit strategies. Most VCs prefers going public however not all companies have the potential to go for IPOs. They prefer to be acquired by a bigger company.

VCs not only invest in companies, but also help companies succeed. They advise entrepreneurs and assist with customer contacts, market specific intelligence, etc.  A VC is successful only if his or her portfolio companies succeed. Venture Capital fare not mere financiers or investors. As partners of the entrepreneur, they contribute in any way possible for the success of the company. The key then is in choosing the right firm for the type of business that you would want to enter into. Just like in entering into a partnership, you wouldn’t want to be partners with someone whom you don’t like to work with.

More detailed information and useful advice can be found at http://www.funded.com/ Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check out website.

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Start Up Business Funding – Don’t Take No for an Answer

Your cousin Lou has told you that he wishes he could help out but start up business funding is out of the question. There’s the mortgage to pay and gas prices are rising and the kids need braces and on and on the excuses go. You received the same answer from Aunt Sally, your best friend Dave and even your own father. You have a great idea for a new business but can’t seem to convince anyone to help you get it off the ground.

Many entrepreneurs are rich in great ideas and have plenty of enthusiasm and a willingness to do what it takes to succeed. But desire and excitement are not dollars, and that is what is needed to get any business off the ground. Finding startup funding can be one of the most difficult challenges faced.  You haven’t proven yourself to potential investors, but you can’t prove yourself unless they give you business funding. It’s the proverbial catch-22. It reminds you of the time you were looking for your first job and the employers told you that you had to have experience first!

Plenty of Options for Those Who Persevere

Many entrepreneurs exhaust all of their own money before they even start looking for outside investors for start up business funding. If you were lucky enough to convince some of your family and friends to invest in your new business, there is still a good chance it was not enough money. That means you have to find other sources of funding in order to take the business to the next level which may include buying inventory, purchasing equipment, or making the next 6 months of payroll. The thought of your business never getting off the ground or coming to a screeching halt is distressing to say the least.

Fortunately, you have plenty of options when it comes to funding sources. Given the complexity of convincing financial institutions or private investors to invest in a tight credit market and limping economy, it is always best to get professional assistance. Gaining access to a network of funders is critical, and like any “private” club you need an introduction.

What are these sources of funding?

  • Angel investors and angel organizations – Earthly angel investors are really private investors willing to invest their own funds in fledgling businesses. The often invest in the form of equity or convertible debt. They truly seem like angels when you need funding, but these angels are investing because they believe they can get a higher rate of return by investing in your company as opposed to investing in traditional financial tools. Many angel investors are also interested in promoting businesses in which they have personal experience or a special interest.
  • Business Loans – These are loans from financial institutions like banks. Despite what you read, the banks are lending to businesses. But since credit is still tight due to the recession, you improve your chances of success by accessing those banks with a record of lending through the recession. That is where a professional can be of invaluable assistance in locating funds domestically or globally.
  • Venture Capital – Venture capital is money that is loaned by a venture capital firm or individual. Larger amounts usually come from firms. These firms are often looking for start-up businesses that have high potential for fast growth and early returns. They take an equity position in your business meaning the venture capitalists take part ownership. But there are innumerable ways to structure the financing and equity arrangements so don’t rule out this type of  funding as a possibility.
  • Equity Partners – This is start up business funding in which private individuals invest in your firm in exchange for part ownership.  Ownership can take the form of stock ownership, but in some cases the investor may want to be involved in a way similar to a partner.

Make No Assumptions

There are numerous types of start up business funding as you can tell. There is no reason to assume that since you are a new business that money is not available from traditional sources like business loans or non-traditional angel investors.  You can pursue startup funding from equity partners or venture capital firms. And while you are looking for business funding, you should go ahead and ask your cousin Larry if he is interested. He just might be the first one to say, “Yes.”