Startups and venture capitalists (VC) share a close relationship. Many prominent tech names that we know today are indebted to their venture capitalists. Finding business funding through VCs can be difficult, but we are here to help you with that.
Approaching a Venture Capital
Instead of contacting as many venture capital firms as possible, go for VCs that best fit your deal and startup. A firm will be more willing to write you a check if their needs are better aligned with your startup.
Establish a Connection
Your first step should be to make a smart introduction to the venture capital firm you are interested in. VCs rely on their trusted connections while sorting through the deals. You should try to get a credible reference (for example, someone working at the firm) before making your pitch.
If you are unable to find a reference, you can impress upon the venture capitalist firm by carrying out a thorough background study of their company. Look at their previous deals and find something that can be related to your pitch. You may also look into the recent press the firm has gotten.
An elevator pitch is the first thing that a startup needs to send to its potential company investors. An elevator pitch is different from a sales pitch. It is a short explanation of the kind of problem the startup aims to solve, how it plans to do it, and the size of the market for the solution.
Your elevator pitch should not be accompanied by a large pdf file containing your profile. Instead, attach a link to your pitch profile hosted online, which should provide further details about your deal.
An executive summary is an elaboration of your business plan across two to three pages. It includes details like the problem, solution, size of the market, the amount of competition, management team, and the financials related to your startup.
A business plan is a document that explains in detail how your startup establishes its objectives and how it will go forth with achieving its goals. VCs do not always read business plans, and rarely will you be asked to submit a full business plan. However, the information from the plan may be useful while answering difficult questions during the meeting.
The financials are the most important document. Most venture capital firms will be expecting a reasonable projection across four years of the expenses and income of your business. They will be interested in knowing how fast your business will be achieving a break-even point and how your startup intends to use their funds.
The Pitch Deck
A pitch deck is an executive summary or business plan presented across 10 to 20 slides of a PowerPoint document. Pitch decks are of interest to investors because you will have to present your information in a brief and with visuals. The details in the pitch deck will be the focal point in your meetings.
After reviewing your materials, your investors will let you know that they are interested in meeting you and will arrange for a pitch meeting. The pitch meeting is not just about the business idea; it is also about making your investors like you as a person.
During the pitch, you will be going through the pitch deck and answering all the questions from the investors. Your goal should not be to get to the end of the pitch deck. Instead, focus on finding an aspect of your business that your investor cares about. Let your investor talk about your first slide for the whole time if you have to.
If the venture capital firm is interested in your business, they will go into the next phase known as due diligence. They will be digging into every aspect of your business – from financial details to your mode of operations. At this stage, you will have to defend your proposals with the help of all the research you have undertaken.
Earning venture capital for your business is an equally frustrating and rewarding experience at the same time. You will be coming across a lot of rejections, but with patience and persistence, you will be able to bring your startup the boost it needs.