In our venture capital blog series we aim to give you the lowdown on the different types of venture capital firms, whether venture capital investment is right for your company, and if so, when, and how, you start pitching. So far we have provided you with an overview of what you need to know about VCs and ask whether you really need venture capital investment. This week we will explore how best to approach a venture fund to seek investment.
So you’ve decided Venture Capital investment is the way your company wants to grow. And you’ve conducted research, identifying your business’s opportunity for fast growth and huge earning potential. Plus, you’ve put your ducks in a row by ensuring a strong leadership team is in place, and your company has already made a good start to growth and development. So now feels like the right time to start seeking Venture Capital Funds. But how do you go about it?
Unfortunately, getting funding from VC firms is a tricky process, and most startups fail to get past an initial fact-finding meeting. But with these tips, you’ll be in good stead to be one of the few.
Start seeking venture capital funds earlier than you think
Don’t plan to start just as you’re about to run out of cash. Not only will it take a lot longer than you think to secure venture capital funds (remember, venture capitalists are investing other people’s money and so need to conduct strict due diligence more signing on the dotted line), it’s not a good place to be in when you’re rushing round to seek funds at the last chance saloon – this will be obvious to potential investors and not be an attractive proposition for them.
Research Venture Capital Firms who are the right fit for your business
Venture Capital firms often specialise in a particular sector. So there’s no point wasting your time approaching funds that won’t want to know about your groundbreaking healthcare solution when they specialise in media and entertainment investments. Do your homework on the VC and the fund – you can gain a lot of information just by searching news updates, social media, and websites. Not only will it help whittle down your priority list, but make you a more attractive opportunity for the VC as it shows you’ve done your homework.
Seek an introduction from a third party contact
VCs will have a large network of contacts in their focus industries who will help educate them in new developments, help them review pitched ideas, and garner introductions. As with seeking funding from Angel Investors, a mutual contact is a great way to get the ball rolling, as no-one wants to trawl through hundreds of cold-call emails. Your above research may highlight common connections who may help set up the first meeting, and if you’ve been recommended by a trusted contact, that can tick some boxes and get you closer to a deal.
Be open in the initial investment meeting
Startups and their founders should be able to provide a pitch, covering their idea, business model, and the opportunity to pique a VC’s interest without disclosing anything that would jeopardise their business secrets. It’s impossible to get excited about an idea that an entrepreneur won’t share and it’s unlikely at the first stage a VC will be willing to sign an NDA, or else they’d never get round to hearing the pitches!
Balance your enthusiasm for the business with calm!
It’s a nerve-wracking experience pitching your baby to a potential investor, but if you go in too hard, or present in an unprofessional manner, no matter how good your idea is, you won’t be called back. Equally, if you’re too timid and don’t fully display your passion and the key benefits of your idea, you’ll be shown the door. It’s a tough art but you can polish your tone and presentation style with lots of practice. Use current investors, your management team, and external advisors to work on this prior to any meetings.
Nail your investment pitch
As ever, it’s essential to nail your pitch and to hone your presentation to as near perfect as it can be. Integrate your personal narrative into the pitch as understanding the motivations to starting a business can be a key driver in wanting to go into business with an entrepreneur and their company. In addition, well-researched projections, an understanding of the market and opportunity and how you intend to grow and become profitable are essential. Keeping your presentation succinct while including everything a VC will need prior to the meeting will put you in good stead with your preparation and avoid being torn to shreds in the pitch meeting.
Decksender can help review your pitch presentation so you know you’re on the right track before seeking venture funds.