FREE online courses on Venture Capital Funding - Be Prepared With Your Business Proposal - Ground rules

 

Remember the following ground rules while making your proposal:

 

Swing for the fences

You're trying to convince the VC firm that you have the potential to be a market-leader. Don't fantasize, but don't be timid, either.

 

Look for a viable partner

Many VC firms like leading and/or participating in reasonably sized syndicates... but if you need to raise $50 million, not all VC firms are going to be a viable partner. You may be better off with investment bankers or seeking a VC firm that suits your needs.

 

Build mutual trust

Most Venture Capitalists are willing to sign a reasonable non-disclosure agreement (NDA) when they reach a point of mutual interest. However, if you present a Venture Capitalist firm with an NDA in your first meeting, it will probably be tossed in the trash. Mutual trust is part of the business.

 

Don't overdo things

Business plans need to be convincing; they don't have to be pretty. Unless you're building a color printer, don't waste your funds on color printing. And unless you're plotting three dimensions of data, don't print 3D graphs!

 

 

Don't ignore competition

You will be your worst enemy if you overlook competitors. As Guy Kawasaki says: "The perfect market has no established competitors, it's growing at 50 percent a year, and there are high barriers to entry for everyone but you. Wake up and smell the silicon. There are no such markets."

 

Be convincing

Most of the smart people in the world don't work for you. Explain how you're going to win in spite of that. Markets tend to shake out into a 50% player, a 30% player, and a lot of little companies who don't make any money. Convince the VC you're going to be one of the first two!

 

Be focused

Technical risk is a big part of the venture capital business; market risk is not. That means Venture Capitalists are quite willing to invest in a better mousetrap if you can prove there is a vibrant and growing market for mousetraps. Betting that a particular market is “bound to emerge soon” has been the epitaph of many high-tech companies.

 

If your business plan is based on a window of opportunity, the VC firm is going to get nervous. If your development slips a bit and the window closes a bit early, is there any market left?