An effective way to receive the venture capital you need is by selling your business to venture capital (VC) firms. But of course you should never approach those venture capitalists empty handed. Keep in mind that venture capital firms will need to assess the viability of your business, first based on your business plan and second on your business presentation. More importantly, VCS is more likely to venture with you if they see these four important qualities in your business: disruptive technology, rapid growth potential, comprehensive business model, and high-performing management team.
Assuming you’ve managed to meet those four qualifying criteria, your next task is to curate the negotiation process between your company and the venture capital firm. Present your business plan with more emphasis on the profit-making aspect. Also remember that venture capitalists will only give you that venture capital fund if you will share a piece of the pie, or a percentage of your capital, with them. Therefore, you should be careful about the terms and conditions proposed by the venture capital firm, as that could affect your control over your business in the long run.
The VC rule is simple: if you take our offer, you can have that venture capital fund. Your goal should also be simple: to receive a good offer. And to achieve that, here are the important things you need to prepare.
Write your business plan well.
Starting a business is hard, but so is writing a business plan. All transactions, events, projections, assumptions and SWOT of your business, you should put them in writing in a way that convinces venture capitalists to make money. Venture capitalists want their money back doubled, tripled or more in 3-7 years. Knowing this, you should show in your financial projections that you can at least break even within the first year or two. The rest of your business plan is showing them that your business is worth the investment.
Justify your Capital Expenditure Plan and your Return on Investment (ROI).
While these money matters are already discussed in the business plan, venture capitalists would want to hear you mention the same facts and figures in your ten-minute business presentation. Expect detailed questions like “Why three years for that ROI, why not two?” or be prepared to give your best explanation when told “What you’re asking for is too much (or too little).” If you want to receive that risk capital, you have to be bold in your financial bets.
Focus on growing your business so they can find you.
Venture capital is a huge industry. Venture capital funds are raised by venture capital firms from wealthy individuals, companies, and private investors. Today, the main players in this market do not stop looking for startups and small businesses that can bring them high returns. If they see that your business is selling high, they will approach you with the venture capital funds. So the idea here is this: make your business shine so that venture capitalists can easily find and support you.
Sell your business with complete confidence.
A true entrepreneur knows his business more than anyone. Whether you’re a start-up or a company poised to launch its IPO next month, you can receive that venture capital if you sell your business with a high level of entrepreneurial skills. Once you’re in front of the VCs, consider it your first and last release. So do your best to get your best venture capital offer.