Is your company ready for venture capital?

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 is best to start pitching. So far we have provided you with an overview of what you need to know about VCs and early investing venture capital, while this week we help you review whether your company is ready for venture capital. 

If you’re looking for investment in your company, you will need to be doing this alongside running the business and everything that entails. So to ensure you’re not wasting your time and looking for the right type of investment, it’s useful to check in with yourself to review whether your company is ready for VC investment. And with VC investment it’s even more important to only start seeking it out when your business is ready or you’ll be wasting everyone’s time.

But how do you know? You may have a good product with a loyal customer base, but you’ll need to be in the right place to show a VC that you are ready for investment, and your management team need to ensure they’re ready for what it means for the business to get VC investment. We cover some key items you need to be on board with to check you’re ready to take the plunge into the world of VC.

Does your company have the potential to make lots of money? And do you want to?

And can you show this in a pitch, with the evidence to back it up? A VC firm will be looking for a business with a large market opportunity, a great management team, and a clear income pathway after they have made the investment. And although you have the potential to make lots of money, is that what you want? Making big bucks comes with a lot of opportunities, but also a lot of challenges. If you’re happy with your current setup, but need some additional funds for a small piece of growth then you’re definitely not ready for VC investment. 

Are you open to quickly scaling your business?

Not every business wants to be a unicorn next week, but may see VC investment as the only option for their business to grow. But, think about how you want your business to grow. VCs want a very large, reasonably quick payout and if you’re uncomfortable with the thought of this, and the difficult decisions you will likely have to make to achieve it, then you’re probably not ready for VC investment, if at all. There are lots of other options for investment, including Angel Investors, who may be a better option for a gradual growth plan.

Are you happy to relinquish control of your business?

This is a difficult question that only you and your management team can answer. You may have big plans that you just can’t achieve without seeking investment, however, consider that some of these ideas won’t be able to be taken forward if they don’t fit the plans of your VC firm. So think about whether you’re ready to have a new voice in your leadership team which could alter the strategic direction of your business.

It’s important to think about these points before you go down the path of seeking VC investment, and determine if you are, or will ever be, ready. If you don’t think your company is the right fit to collaborate with a VC company, trust your gut and don’t pursue this path. But don’t be disheartened by the prospect of not having big bucks to spend quickly, or think you don’t have the opportunity to be a huge success (think Mailchimp). If you have the right business model and apply an excellent plan, you can develop and grow in the right way for you.