Five ways to attract venture capital

 

1. Provide a product or service with the potential for rapid and sustained growth

The most important factor that venture capitalists consider when looking at potential investments is whether the product/service itself is likely to generate the kind of growth suitable for their investment. Venture-capital firms generally look to invest for short periods of between three and seven years, so are unlikely to provide capital if the potential for high returns over a short period is not there.

2. Have an airtight business plan

Once you are certain of your product’s potential and attractiveness to venture-capital investors, the next important step is to make sure your business plan boldly demonstrates how you will turn this potential into results and, of course, a return on investment. Venture-capital firms look for business plans that demonstrate a firm grasp of the relevant markets and how the company’s products fit within these, as well as a pragmatic and realistic approach to achieving measurable goals.

3. Highlight the experience and capabilities of your management team

A unique and groundbreaking product combined with a well thought-out business plan is not enough to secure investment. Venture-capital firms want to know that the individuals running the company have the ability and the experience to guide the business to success, and hence provide significant returns on investment. Having individuals on board who have extensive experience in the particular markets in which your company operates will, of course, aid your case greatly.

4. Provide a clear and well-defined plan of how invested capital will be used

Once the venture capital investors are satisfied that your business and the products it offers are suitable for their investment, they will then want to know precisely how their investment will be used, and how this will aid the growth of the company and their equity share. Provide exact figures and back these up with clear and convincing arguments of how such funding will promote growth. For example, £25,000 to finance a marketing campaign to grow the brand and £50,000 to hire x number of customer service advisors to cope with increased demand.

5. Approach venture capital firms that specialise in your business’s niche

While some venture capital firms take on a broad range of high-risk high-return investments, many specialise in particular markets and industries. By targeting those that are most relevant to your business and its services you increase your chances of obtaining investment.

Terry Irwin is the managing director at TCii strategic and management consultants.

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