Right then. First off, know that the odds are stacked against you. Many investors only pick one deal in 500, or even 1,000.
So what can you do to be successful in raising venture capital?
Research thoroughly the best investors for your needs. Who invests the right amount of money in companies like yours?
Not too like yours, mind you, because you don’t want to open your kimono in front of someone who is a shareholder in a competitor. Are there any specialist investors who focus in your sector, or in your geography?
To improve the odds of getting through the doors, find an introduction to the investors you want to approach. Best of all is an entrepreneur they have backed successfully. If you don’t know any of them, why not just contact a couple and ask for their advice?
Second best is a business contact with whom the investor has worked happily before. Work your network. If you don’t have a network… well perhaps you should not be raising money, or go and find a professional adviser who specialises in raising equity. But remember that worthwhile advisers are almost as hard to get as investors.
Then make sure that when you get through the door, your product is just as good as it can possibly be.
At this stage, of course, your product is not your product. Partly it is your business plan.
If your business plan were a person it might be locked up, because it has a seriously split personality. It needs to show the potential upside for investors and endure their sensitivity analysis, but in the short term it needs to be utterly achievable.
It will inevitably take longer to raise money than you ever thought, and during that period it is vital to exceed your plan. And then, in spite of its split personality, your business plan has to pass sanity checks such as “what other company has achieved these results in this space of time?”.
Partly your product is you. So make sure that you’re fully prepared; that you can answer every question relating to your plan, your market, and your competitors, without turning to the notes supporting the financials. Make sure that you’re fully briefed about the investor you are meeting and can ask good questions that demonstrate your knowledge.
And never, ever, get into a position where you have to accept investment. Always have a fall back plan that is under your control. Otherwise you will have lost your company before you start.
Simon Acland is a former venture capitalist. His latest book,”Angels, Dragons and Vultures: How to Tame the Venture Capital Beasts… And Not Lose Your Company” is available on Amazon.
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