When you talk about the startup world, one of the hottest topics you are going to hear about is venture capital, and with good reason. Some of the biggest names in recent business history have venture capital to thank for their initial funding through key stages, and you’re likely to hear plenty of financial guidance on how to go about getting it. However, the best way to approach this issue is not to get over-focused on hacks and tricks, but to look at the basics. This first starts by finding the ideal match to pitch to.
Depending on where your business is based, especially if it is close to some of the VC hotbeds around the country, you may have the advantage when it comes to finding key VC firms, but the best firms out there don’t get that way by helping every single startup that comes their way. Generally, they will specialise in certain niches of business (like tech) or business at certain stages of development. Trying to pitch to a firm that doesn’t specialise in your area of expertise is wasting both of your time. If you don’t have a firm in your area to pitch to, there are other ways to connect to potential VC investors, like professional fundraisers, conferences, and trade shows. These events are ideal because you can get face-to-face time with them, and they already may be thinking about investment.
However, at this moment, you need to make sure that you have both a refined pitch as well as the other key elements in order to garner that interest and that potential investment. For example, one major point of contention you need to have is a strong team. At the end of the day, ideas and passion are commonplace, but by having a combination of skilled and experienced professionals on your team, it creates a stronger argument that you can deliver on your plans. You also want to have concrete figures in terms of the revenue potential and exactly how much funding you are going to need.
However, along with this, there’s also a step after you find success. Remember, a venture capitalist has their own goals for their investment, and generally, they will align with yours in terms of being successful. However, they may think that there’s a better way to meet those goals, meaning that you need to negotiate different changes or concessions. The first thing you need to do is understand what leverage you have in these scenarios. If you are juggling several different VC offers, you may feel more comfortable asking for more favorable terms. This is especially important during those early stages of funding where money is tightest.
One common concession that the investor may ask for, particularly if they are a formal firm, is installing a person on the board to represent them. This allows the VC to hear about progressions, news, and developments at your company, as well as offering input. However, while this is common, the different members of the board of a company can have a major impact on its future, so you don’t want to approve this term without serious thought.
Venture capital is a great option to help people secure funding for businesses at various stages, but you need to think hard about what you are willing to give up to get said funding, as well as having a refined pitch and concept for potential investors. In addition, there are other ways to pursue said funding if this isn’t a good match for you. This is where companies like PrimaryMarkets come in, serving as a global independent marketplace that lets wholesale sophisticated investors take part in secondary trading of securities and investments. In addition, we also help unlisted companies and trusts raise new capital.