Raising Venture Capital

Everyone wants to raise venture capital for their new business ventures for so many reasons. I get that without venture capital, you might not be able to progress into the all the ideas you have and make them a reality, right away, but you should never rely on getting funded and try to work around it, if you can. That said, if you are looking to get funded, there are some steps that you can take, which might give you a leg up over the other 100 pitches the VCs you are pitching to, hear.

Everyone says it is a tough task, but I beg to differ. If you have a worthwhile product and you can get through to the VCs head without using buzz words and tomfoolery, you have a shot at getting funded. That was an obvious statement, but it is so true. I'll be honest, a lot of people think they have wonderful start-ups, but the reality is, they are the only consumer for it. Entrepreneurs sometimes get so blinded by what they think their product is or what it can be, they forget the reality of it. So that said, if you have a great start-up, there is no reason that it shouldn't get funded.

Dealing with a Venture Capitalist

Before you do anything, I am talking from the moment before you have an idea for your future venture, you better start getting to know investors, or at least, get close with people who are really good friends with investors.

If you want to get money from a VC, then you have to think like one.

1. A VC will not fund an idea, they will fund a product that exists. I love hearing about entrepreneurs ideas, but that's because I am not funding their venture. VCs like to see the entrepreneurs product, because they are funding something, rather than funding air. Just like the saying, actions speak louder than words; show, don't tell.
2. Well Romil, if I don't have VC money to put my idea into reality, how will I start it? -Seriously? No entrepreneur I know has ever considered themselves as an entrepreneur, with no capital to invest in THEIR OWN IDEA! I don't know any business that requires $0 to start-up.
3. Think, elevator-pitch. A VC won't go to Disney World with you, so why do you think they have a day to spare listening to your pitch? VCs don't want to read about your business or hear you give a presentation full of buzz words because they know it is a bunch of nonsense. You better be prepared to make your pitch as short as possible, yet explain everything that your business does. That might be complicated, but then you should take it a step further, and make sure a young child (maybe 5 or 6) can understand what your service does.
   
4. Lets say that I am a VC and you are my best friend. You just started a company that you think will be most successful company of the year, and you tell me about it. Even though I am your friend, I might not be able to fund your venture because I am investing with some other rich guy's money, and I have to answer to him for why I funded your "lemonade stand." So going back to the first sentence, just because you know VCs, doesn't mean that they will fund you!

The Presentation

There are some obvious things you should include in your presentation and then some not so obvious.

1. A short and straight forward sentence of what your company plans to achieve.
2. What problem does it solve in the world? Why would people use your product or service? And then include how exactly you plan to achieve a solution for that issue.
3. Who is on your team? What? You don't have a team, it's just you...flying solo?! Why are you here for venture capital funding?!
   
4. How big is the market for the product?
5. Which companies exist in the market for the product? (competitors)
6. What is different about your company than any of the competition and how will you get to the top?
7. Unless you are Facebook, you will need to make money. How do you plan on making money? (As simple as that is, I wouldn't make it a simple statement that is too broad. Instead, I would explain the exact business model for the venture.)
8. How are you going to market? Even if you think your product will spread virally, that is still just what you think. A VC will want to know how you will actually market the company.
9. I want $100 million. Well....why? Figure out how much money you want to raise and why and how you will use it. Random numbers don't cut it.

What else?

• If you have a choice of taking money from a new venture capital fund or one that has invested in many companies, you should take the one with more experience. Chances are they will be able to give you some feedback, on what you are doing. Nonetheless, they will still make you accountable of "bringing the goods" to the table.
• I need $20 million. I only got $5 million. There are a couple options here:

1. Learn to work with what you have and expand your company from its revenue.
2. Seek money from other venture capital firms. If you look at any company who has been funded with such amounts, they have taken venture capital from a few different VC firms.

These are just some of the BASICS of getting into raising venture capital. At the end of your pitch, you should also be ready to answer some serious and possibly, intense questions. Don't say "uh," "hmm," or "eh." The VCs are watching...and they know when you LIE!

I would also note that if a firm rejects you for funding, it doesn't mean the road has ended. You would be surprised, how many VCs think something is "dumb" and then they end up funding that same venture down the road. You might want to also try getting funding from another firm, just because one said no, it doesn't mean they all will...or will they?