How to Raise Venture Capital
There are 4 simple steps to raising venture capital:
Step 1: Do Your Homework
Before you speak to venture capitalists, you need understand what VCs want and how the venture capital industry works. You need to do your homework. And if you want an investor to fund your company, you need to be able to answer these questions:
- Why are you raising venture capital (instead of another type of funding, like angel investment or a bank loan)?
- Exactly how much funding do you need?
- What would you do with the venture capital?
- What's your valuation, and what percentage (equity) of your company will you give up for the investment?
And that's just the first step...
Step 2: Find and Contact the RIGHT Investors
Next, you need to identify the right venture capitalists, so you can contact them and start lining up your meetings, and give your pitch.
In order to get the best results, limit your search to firms near you who already invest in your type of business. Don't waste your time reaching out to investors who don't fit this profile. Quality is much more important than quantity.
When you do contact venture capital firms, avoid the common mistake of sending your business plan right away. Instead, you want to send them some "bullet points" about your business, outlining key accomplishments to date, to see if they're interested in learning more.
If they are interested, they'll let you know. After initial contact, investors will often ask to see your business plan or executive summary. Or, they may ask to speak over the phone or meet them in their office, which brings us to step #3...
Step 3: Refine Your Pitch
Your VC presentation is, by far, the most important part of the whole venture capital process.
You may get dozens, even hundreds of meetings, but if you don't have a great pitch, you may not receive any investment.
Luckily, we've created a step-by-step Venture Capital Presentation Template that allows you to quickly and easily create a persuasive VC pitch.
But that's not all...There's more to master than your presentation.
You also need to be careful about protecting your business ideas during your VC meeting, and you need to answer all the tough questions VCs will throw at you during the in-person meeting.
Then, even if you impress investors during your meeting, and you get a term-sheet, you've still got one more step...
Step 4: Close the Deal
Don't make the mistake of counting your money before it's actually in your bank account.
You need to make sure you're prepared for due diligence.
And, perhaps most importantly, you need to make sure you're receiving a good valuation, so you don't give up control of your company. However, don't stress too much about the valuation, because "a small slice of a big pie" is more valuable than 100% ownership of a business that never takes off.
If you follow each of these 4 steps, then you'll raise the venture capital and grow the business you've always dreamed of. Good luck!
Growthink helps businesses raise venture capital. Since 1999, Growthink has helped more than 2,000 entrepreneurs raise more than $1 billion. Questions? Call Growthink today at 877-BIZ-PLAN