How to Unsuccessfully Chase Venture Capital
Posted by admin on 9 Nov 2010 5:57 pm. Filed under How To Raise Capital For Your Small Business Startup.
Len Williams
One of the most stressful and also chalenging stages of a business is probably that of raising startup capital. After using your own savings, appealing to your family, friends and acquaintances you realize that you still need money and banks will not be of any help, as the risks are too high at this point. You decide to use a venture capital firms, angel investors and private equity funds directory and contact business investors. Here are some mistakes you should avoid, unless you want to start a neverending discouraging chase for capital.
Contact Everybody in Your Database
The first mistake is to try and contact as many investors in the database as your time allows you to do, or even hire a person to deal with that. Acting in such an immature way starting from the assumption that everybody will be interested in your innovative idea is a big mistake. Venture capitalists are specialized in funding companies in different industries, for the reason that they need to understand those fields when they decide to invest. Search for VCs that have had similar companies in their portfolio. Consider only those that are geographically located less than 100 miles away from your offices, so that they can provide help and expertise as well.
Quickly Write a Poor Business Plan
Don’t think writing a comprehensive business plan, that would have the size of a Final Diploma, would mean wasting time on somethink that nobody is actually going to read. VCs are going to ask you a lot of questions about different aspects of your business and all the answers should be in your business plan. This will prove you have knowledge of the business you are in and what you are going to do, you are aware of your strengths and weaknesses, you know your customers’ needs and your own company’s needs, you know exactly what amount of capital you have to be e provided with, when and what for and you can make financial predictions as well. Moreover, this business plan will be your guide along the development process, so you will keep it updated, as the market is changing constantly.
Ignore Competition
You are not alone on the market, however new your business idea may be. Your competitors could have similar products or services, they could have similar technology that would make them able to develop a product with the same features or that would be able to satisfy the same needs of customers. Your competitors could be using more advertising channels and could have a better marketing strategy, so even if your product is better, theirs is popular. Not having solid data about major existing an also emerging competitors could be interpreted by venture capitalists as an arrogant or even ignorant attitude.
Forget that VCs Will Be Your Business Partners
Venture financing is not only a simple transaction, like taking a loan from the bank, it is much more than that. The venture capital firm that will give you money will not only expect high returns from you. They will also ask for a seat in the board of directors, meaning that you will not make important corporate decisions without asking for their advice. Your relationship with the VCs should be based on transparency and mutual trust and they should be open to offer their expertise any time it is necessary.
Don’t Talk about Your Team
Although you are supposed to have a separate chapter in the business plan with a detailed description of your team, from managers to specialists, with their educational background and business experience, you may be carried away and keep talking about your ideas only, about your projections, plans and expectations. Your business goals are going to be accomplished with the help of this team, using their skills, ability to focus, adapt and work together.
Make a Spontaneous Presentation
In order to make a good impression and put your ideas forward, even if you have learnt your business plan by heart, you need to be a skilled presenter. Make sure your speech is clear, you show confidence and don’t use excessive name-dropping. To be a successful presenter you need to have a good executive summary, that would help you organize your ideas and venture capitalists understand the key points and you are supposed to organize your speech and perform it before the pitch. Unpredictable questions may arise, but being prepared will only make you feel safe and confident.
Bring Countless PowerPoint Slides
Reading from the slides stuffed with text and pictures will only make your audience lose temper or patience and finally get bored and not listen to you. A good PowerPoint presentation should consist of no more than ten slides, each with the key words or main points of what you are going to say and it should not last more than twenty minutes. Your slideshow is supposed to be a supplement, not do the talking for you.
Pitching venture capitalists requires a lot of preparation, research, article reading, asking for advice and all these can cause a lot of stress and nervousness. But don’t forget VCs are humans too and a bit of humour to spice things up is always welcome.
One of the most stressful and also chalenging stages of a business is probably that of raising startup capital. After using your own savings, appealing to your family, friends and acquaintances you realize that you still need money and banks will not be of any help, as the risks are too high at this point. You decide to use a venture capital firms, angel investors and private equity funds directory and contact business investors. Here are some mistakes you should avoid, unless you want to start a neverending discouraging chase for capital.
Contact Everybody in Your Database
The first mistake is to try and contact as many investors in the database as your time allows you to do, or even hire a person to deal with that. Acting in such an immature way starting from the assumption that everybody will be interested in your innovative idea is a big mistake. Venture capitalists are specialized in funding companies in different industries, for the reason that they need to understand those fields when they decide to invest. Search for VCs that have had similar companies in their portfolio. Consider only those that are geographically located less than 100 miles away from your offices, so that they can provide help and expertise as well.
Quickly Write a Poor Business Plan
Don’t think writing a comprehensive business plan, that would have the size of a Final Diploma, would mean wasting time on somethink that nobody is actually going to read. VCs are going to ask you a lot of questions about different aspects of your business and all the answers should be in your business plan. This will prove you have knowledge of the business you are in and what you are going to do, you are aware of your strengths and weaknesses, you know your customers’ needs and your own company’s needs, you know exactly what amount of capital you have to be e provided with, when and what for and you can make financial predictions as well. Moreover, this business plan will be your guide along the development process, so you will keep it updated, as the market is changing constantly.
Ignore Competition
You are not alone on the market, however new your business idea may be. Your competitors could have similar products or services, they could have similar technology that would make them able to develop a product with the same features or that would be able to satisfy the same needs of customers. Your competitors could be using more advertising channels and could have a better marketing strategy, so even if your product is better, theirs is popular. Not having solid data about major existing an also emerging competitors could be interpreted by venture capitalists as an arrogant or even ignorant attitude.
Forget that VCs Will Be Your Business Partners
Venture financing is not only a simple transaction, like taking a loan from the bank, it is much more than that. The venture capital firm that will give you money will not only expect high returns from you. They will also ask for a seat in the board of directors, meaning that you will not make important corporate decisions without asking for their advice. Your relationship with the VCs should be based on transparency and mutual trust and they should be open to offer their expertise any time it is necessary.
Don’t Talk about Your Team
Although you are supposed to have a separate chapter in the business plan with a detailed description of your team, from managers to specialists, with their educational background and business experience, you may be carried away and keep talking about your ideas only, about your projections, plans and expectations. Your business goals are going to be accomplished with the help of this team, using their skills, ability to focus, adapt and work together.
Make a Spontaneous Presentation
In order to make a good impression and put your ideas forward, even if you have learnt your business plan by heart, you need to be a skilled presenter. Make sure your speech is clear, you show confidence and don’t use excessive name-dropping. To be a successful presenter you need to have a good executive summary, that would help you organize your ideas and venture capitalists understand the key points and you are supposed to organize your speech and perform it before the pitch. Unpredictable questions may arise, but being prepared will only make you feel safe and confident.
Bring Countless PowerPoint Slides
Reading from the slides stuffed with text and pictures will only make your audience lose temper or patience and finally get bored and not listen to you. A good PowerPoint presentation should consist of no more than ten slides, each with the key words or main points of what you are going to say and it should not last more than twenty minutes. Your slideshow is supposed to be a supplement, not do the talking for you.
Pitching venture capitalists requires a lot of preparation, research, article reading, asking for advice and all these can cause a lot of stress and nervousness. But don’t forget VCs are humans too and a bit of humour to spice things up is always welcome.
