Venture Capital Financing Requirements: What Venture Capitalists Want

Many firms dream of the day that a venture capital financing occurs. This is the day when they are handed a check for millions of dollars and told to go fulfill their entrepreneurial dreams. Unfortunately, for most this remains a dream. But this doesn’t necessarily have to be the case. Securing a venture capital financing can be a reality under the right conditions.

Perhaps the most important condition is that the firm develops a winning venture capital business plan. The business plan is the initial piece of information that venture capitalists review, and if it doesn’t compel them to take action, the journey towards venture capital financing ends abruptly.

Assuming that the business plan is flawless, what else is required of the management team seeking venture financing? The answer varies from firm to firm, but most venture capital firms want to see most of the following:

1. proprietary intellectual property
2. a large market size
3. management team members with expertise and experience
4. a scalable business model
5. the ability to exit for $50 million or more within 5 years
6. a current valuation that allows for a good return on investment

A final challenge in securing a venture capital financing is identifying the right venture capital firm.

Venture capital firms typically have preferences that revolve around their:

1. location
2. sector preferences
3. stage preferences
4. partner backgrounds
5. other portfolio companies
6. total assets held by the firm

Ventures seeking capital should make sure to find venture capitalists whose preferences match what they have to offer.

Raising venture capital is challenging, but fortunately, the results can far outweigh the hardship of overcoming the challenge. For firms that properly plan for and methodically approach venture capital financing, results are often within their reach.