How to Approach Venture Capitalists

A wonderful idea that can change the way the things are being conducted and will surely alter the market equations. But in real life situations, that differ greatly from the plots drawn in world of fiction. Many such ideas spend lifetime gathering dust in the closet waiting for their proverbial time to come. On the other end, in the same world of perceived reality, millions of dollars remain stuffed in the lockers of wealthy individuals with each passing day reducing them in stature and progressively diminishing their net worth in the market, till the time when the only value they would fetch will be because of their antiquity. The lot of their busier cousins is no different who remain invested in various mundane investment options always waging a losing battle against inflation and the fluctuations in the forever shaky markets.

In light of the said circumstances will it not be simply “awesome” (as a young entrepreneur will put it), if the best of both the disparate worlds could be brought together. If both complement each other so perfectly and in absence of each other are sheer wastes, will it not be amazing for every one concerned to have them thrive in a symbiotic relationship with each other. This is the basic premise on which Venture Capitalists and cash-starved startups pitch themselves in front of each other leading to a marriage that spells success and prosperity for everyone involved as well as for the markets and consumers. Moreover, VC funding is very important for a newly started entrepreneurship and the person who is investing in his money will get a complete knowledge of your project and its profits and loss.

Let us first briefly understand the concept behind this phenomenon. Venture Capital is a kind of private equity provided to young and immature startups that will otherwise stagnate and probably get wiped out for lack of funds. But let no one be mistaken as this is no act of philanthropy or CSR (Corporate Social Responsibility). The Venture Capitalist is often a wealthy individual, or a group thereof, with a shrewd business sense that can spot promising and potent business ideas that are capable of rendering the deliverables in the future. They provide the much needed cash in lieu of certain interests such as stakes giving them huge control in the decision making or assurance of great returns in case of certain realization events such as IPO or trade sales.

In today’s times when every neighborhood kid fancies himself as an Entrepreneur it becomes very difficult for the true spirit and the great idea to shine through. But remember the person who is putting his money at stake is intelligent enough to differentiate wheat from the chaff provided one make all the right moves at right times, considering in the fiercely competitive business world of 21st century few will get a second chance to make a “first impression”.

Now, the under-written text will outline in brief the thumb-rules of the various protocols and methodologies to be followed while approaching a Venture Capitalist for an entrepreneurship.

1) Target the right and appropriate Venture Capitalists Funds:

It’s like a job interview or the selection round of admissions in an elite professional school. If you have what they need you will definitely cut the grades otherwise you will be politely (hopefully!) asked to leave. Most of the Venture Capitalists and the funds they create are very specific in what they are looking for funding. Nobody is a master of everything. Obviously a Venture Capitalist will prefer businesses and markets that it understands and shuns others. So, getting your homework done is always recommended. Do not waste your time and energy and that of others for something that already has bleak prospects of materializing.

2) Make a good impression by having a good and comprehensive business plan and summary:

Borrowing from the earlier text, if on needs to distinct between wheat and chaff, at least the wheat should be recognizable. A Venture Capitalist worth pursuing is always flooded with business plans each promising great returns. So a business plan seeking attention should not only outline the potential in the project but also how it plans to exploit those potentials in concrete terms as well? It should showcase the business idea in concise but clear terms suggesting the Venture Capitalists that the presenter knows what he is doing.

Similarly, the Executive Summary, ideally 2 to 3 pages long, should convey other relevant information like the Management Team, the market size, the opportunity, etc. If it will succeed in arousing the interest of the Venture Capitalist he will himself ask for more details. Till then, spare spilling your beans unnecessarily.

3) Showcase an extremely lucrative product or service that will change the market dynamics:

Somebody, who himself has lots of money to risk in an upcoming venture, will obviously not get interested by the idea of turnover reaching a few millions. So obviously the idea should be potent enough to provide the lure of considerable returns to the Venture Capitalists as well. And if your idea is so good that the thought of missing it out can give sleepless nights to them, then you will be the reigning king having the power to bargain and get the best deal for yourself.

4) Have a Management team that can lend you credibility:

Good reputation and a proven track record, whether in corporate or in academics, is always an asset. People deduce logically that someone who has delivered in past will prove equally effective in the present as well. So a Management Team that looks good in a cursory glance and later in a thorough scrutiny will always make the task of getting the Venture Capitalist all that more easier.