Get These 6 Steps Checked on the List before Approaching Venture Capitalists
Start-ups, a trend so imminent that cannot be ignored and a venture a capitalist is like a godfather that supports these novel business ideas and plans into successful organizations. Any venture or business idea cannot achieve its potential if it is not funded properly. While the entrepreneurs focus on building brands that can initiate with low investment and yields high returns, funds are still essential to ensure growth after a certain stage. In entrepreneurship, after choosing a niche and having a proven business idea ready along with a complete market analysis, the next step is to approach venture capitalists.
Why venture capitalist?
Rather than taking loans from banks or relatives, approaching venture capitalists is always preferred to initiate something big. Why? They are professionals with years of experience and mostly because they have contacts. The biggest drawback of a start-up is having no experience in the industry and with a venture capitalist, the math seems to work. Unlike lenders, the venture capitalists offer to become a part of the management owning a part of the business in the form of equity.
Venture capitalists investment is businesses which could offer the clients with the highest satisfaction while keeping the costs in place and yielding a successful business. These professionals are no less than eagles looking for every prospective opportunities of the business before they invest their money and time into the business idea.
- Unique Ideas, Right Time: Venture capitalists have a strong calling for investing in unique businesses and provides solutions to queries that do not have solutions or not so effectively. It is essential to understand how your business idea is adding value to the lives of people. In a tough competitive environment, one must work with ideas in a pace that helps them get an edge over competitors and avoid the me-too(s). Approaching the VC with unique ideas at the right time is essential.
- A Working Business Model: It is a myth that venture capitalists invest in businesses that are in their initial stage. VC has a high amount of money and a limited amount of time frame, they do not want to achieve success in a long period but within a time frame of 5 years, hence they are looking towards start-ups. However, with the uncertain technology, no investor wishes to invest in a company. The investors need to have a sense of security and assurance in technology and its working. A VC would only invest in a tried and tested technology.
- A Strong Management Team: While the idea is the core of the start-up, a business needs to have a strong management team to manage and build a successful organization. The most essential part of having a management team is that it handles all the queries and seeks solutions to challenges along with building a company culture. The VC would want to understand what the philosophy the management follows.
- Fitting into VC’s Investment Philosophy: Once interacting with the VC, business entrepreneurs should be very clear about how their business idea fits into the strategically planned investment approach by VC. While some strictly focus on returns, some invest in start-ups that support their parent companies. The main aim of the VCs is to earn returns, whether they do it strategically or not, so it is essential to make that you fit in their plans and also make sure that you approach the right person at the right time.
- Having a Solid back-up: Any venture capitalist would look into the business in all aspects making sure that the business is feasible. A business idea that a VC would like to invest in is with authentic projections of growth, not unrealistically high or falling short. Entrepreneurs here should have backup of the metrics and data that a VC would like to have a look at before making his/her decision.
- The Plans to Use the Money and Communal Benefit: A VC would like to know exactly how his money is going to be utilized in the company and yield success. One should have a detailed, feasible and planned map to showcase where the money is being planted in the business and why.
Checked these points? Well, it’s time to get to the grind and approach the venture capitalists with your novel business ideas that have the potential to revolutionize industries. Remember visiting the venture capitalist at a stage where your business is already above the initial planning stage as no venture capitalist would invest in something that is just an idea in its initial stage.