Early bird venture capitalists catch the worm

Early bird venture capital

In the first of our venture capital blog series, we take a look at early investing venture capital. This series will give you the lowdown on venture capital firms and help you determine when to seek venture capital investment in your business, if at all.

We associate venture capital with later stage investments, and as we discussed in the Angel Investor vs Venture Capital article, venture capitalists are private equity investors that invest other people’s money in companies that have high growth potential in exchange for an equity stake. Due to the fact they invest other’s money, they have a large number of criteria to meet when judging opportunities which early stage investments often don’t meet yet. But some venture capital firms specialise in investing in early stage companies.

As it’s a challenging process to gain venture capital investment, plus the equity stake they seek is often higher than other avenues, it’s often more attractive for companies to seek angel investment opportunities. However, for companies that have large startup costs and need a large amount of funds to scale the business, early stage VC could be for you. VCs look to invest in innovative companies with the potential to scale fast and have huge growth potential that they predict will become a major competitor on a global scale, and successfully exit later down the line. 

Are you ready for VC?

As with any relationship, you need to be sure VC is the right way to go, as opposed to other investment avenues, you must be prepared to lose an element of control and the decision making process when getting into bed with VC investors. 

Ask yourself the following questions – some to determine whether you’re happy to take the plunge with VC, and others to confirm it would be a worthy avenue to pursue:

  • Is your product unique?
  • Is your business scalable
  • Do you have early traction with an MVP or customers?
  • Are you willing to replace members of the leadership team or yourself?

If you are happy with these, VC could be for you. The process will be similar to what we covered in pitch to angel investors and timeline for angel investors, but there will likely be more time in due diligence. As ever, don’t underestimate how long it will take to gain investment and allow yourself up to a year for this process.

Early stage investment is split into three parts:

  1. Pre-seed
    This helps startups get up and running and enable them to move towards creating an MVP and building their operations.
  2. Seed
    This is the first part a VC would invest in, where companies seek a smaller investment to help them develop their product or service while testing the market.

  3. First round / Series A
    This stage is for companies that have their product / service, team and go-to market strategy in place and are seeking larger amounts of money to scale and pushing sales.

If you think your company has what a VC will want, and you’re ready to take the plunge with a VC firm, then approaching VCs at seed level could be for you.

How to find an early stage VC 

There are so many VC companies out there and it’s hard to know which ones will invest early and are trusted. Sifted published a handy list of venture capital firms for early-stage founders which helps you get a taste of the types of companies you’d be dealing with.

Whoever you approach, the key is having a great idea, a killer pitch and deck. When you find the right investor for you and your company, you can start the hard work!

Find VC investors to pitch to using Decksender