Venture capitalists usually fund emerging businesses and high end startups with high growth potential and experienced management. They will never fund your business unless you demonstrate that it will grow fast and become large in size within a short time. You must have a track record in running successful businesses. Additionally, if your business is service based, you can as well forget venture funding. From the onset, you should draw the distinction between venture capital and angel investment. Venture capitalists will usually demand everything that angel investors demand on top of everything else. Most importantly, venture capitalists prefer making large investments in late stage startups. Read on to discover how to get venture capital for your startup.
Do your Research Well
Doing thorough research will help you identify venture capitalists who invest the amount that you are targeting; at your stage of development; in your region and in your industry. This is critical because different venture capitalists are interested in investing in businesses meeting different criteria. Fortunately, you will readily find information relating to different venture capitalists on their websites. For a start, you could visit National Venture Capital Association and thefunded.com, they have a wealth of information on venture capitalists.
Avoid Bulk Emails
Serious investors will not bother reading your summary memo, a business plan or watch a pitch once they suspect that you are sending in bulk to multiple investors. Unsolicited emails and phone calls will surely fail you.
Have a Good Strategy
The best strategy would be to carefully approach potential investors one at a time. Start by looking for introductions from people you know who may know an investor. Check out for their alumni relationships, public speaking dates, business associations or any contacts in companies in which they have previously invested. You stand a better chance if you get an introduction from somebody known to the investor.
The Elevator Pitch
You should be able to capture the key points that define your business within a minute. In fact, if you can describe your business in a sentence or two, you are likely to convince a venture capitalist. Always ensure the sentence is intriguing. Tim Berry, founder and chairman of Palo Alto Software and a thought leader in business planning has written 7 Key Components of an Elevator Pitch; 5 Things Missing from most Entrepreneurs’ pitches and How to Personalize your Elevator Pitch, all of which will be good reads for you as you seek to convince venture capitalists to invest in your business.
The process may take quite some time. Due diligence by prospective investors usually takes months of unending requests for additional documentation. You also need to know that venture capitalists may say yes when they actually mean maybe and say maybe when they mean no. Always remember to be patient and explore as many options as possible.