One of the most common problems that many early-stage startups face is the lack of funding and access to publishing their products in the market.
In the business world, the bottom line is often cash flow. Having a lack of access to proper cash flow and adequate financial resources can be the downfall of a startup.
One way around this issue is a popular approach that many startups adopt as their modus operandi — engaging a good venture capitalist, also known as vc. However, it is often difficult to get one on board as many venture capitalists are accustomed to the process of watching the rise and fall of a startup they have invested in.
The key to selling the story of your company’s potential success lies in these top factors we have identified in this article. With these tips, you will be well on your way to having a great venture capitalist onboard your startup company.
1. Working Prototype
Picture yourself in the shoes of a busy venture capitalist, one who takes dozens of business meetings a day. If you were to come across a startup without a working prototype, would you be easily convinced that the product works?
Chances are you probably will thank them for their time and end the pitch meeting as soon as possible.
To successfully pitch your idea to a venture capitalist, it would be great to have a working prototype at hand that your investors can see and feel in real-time. That way the chances of securing a deal would increase manifold.
2. It’s a Numbers Game
Having your financial records and fiscal performance figures on hand to present to your desired venture capitalist is a great way to demonstrate that you take the bottom line of a revenue-generating business seriously.
Most venture capitalists have a keen eye for whether or not a startup will potentially do well by simply glancing at sales and financial charts and figures. Not having such records on hand or even maintained well could signal poor planning and financial management to venture capitalists.
3. Have a Financial Plan
Have a detailed breakdown of how you will be using the amount of investment that you will be asking for. This way, venture capitalists will be able to see how their investment is being put to use.
You should draft a proforma of estimated costs and expenditures before even coming up with a requested investment sum. This will be greatly appreciated by venture capitalists, especially those who are cautious about how every single cent of their investment is being spent.
4. Put Together a Solid Team
Startups who walk into a room inexperienced and with little to no confidence are often doomed to fail. Having an experienced team put together in your company with a visionary leader signals confidence and potential for success to venture capitalists.
Aside from being attractive to venture capitalists, having a great team and a good leader will ensure that your company always remains on the right track. A good leader will always put the company’s interest above their own, and having a stellar founder that can make good business decisions will ultimately decide the fate of the startup.
A good startup founder should have values like vision, passion, the ability to build a good team, the ability to stay focused on a goal, the willingness to ask for what is needed, humility, and persistence. If you have such a founder, you are well on your way to taking your startup to the next level.
5. Establish Good Interpersonal Relationships
No matter the outcome of your pitch to venture capitalists, you should always strive to establish good interpersonal relationships and connections with them.
As the popular adage goes, “it’s not about what you know, but who you know.” This couldn’t be truer in the startup world. Having a great network of venture capitalists to whom you can reach out for advice in navigating the complex startup world will be greatly beneficial in deciding the future successes of your company.
Furthermore, having a good working knowledge of the portfolio of the venture capitalists you are reaching out to can signal you out as someone who has done your research. This may increase your chances of securing multiple pitch meetings (after improvements and iterations, of course) if the first few did not work out.
With good relationships built, you may even be able to tap into your networks to reach out to other venture capitalists on a recommendation basis.
6. Risk Assessment
With any project or business, it is important to come up with a risk assessment metric that lets investors know what exactly they are in for and the potential losses they could incur along the way.
For instance, if you are in the renovation business, a risk example could be worker error causing damage to property and lack of quality of services offered to clients. These risks should be factored into your pitch to venture capitalists so that they are aware of the potential legal and financial consequences.
With a proper risk assessment chart in place, venture capitalists will be better able to assess their consideration of your startup company as well as the long-term potential you hold.
7. Quality Product
Last but not the least, your startup venture should be founded based on having a great and innovative product in mind. This product should be able to stand out in a highly saturated and fast-paced market, one that sees imitations and knock-offs popping up at lightning speed.
You should be able to demonstrate to venture capitalists what is it that makes your product innovative and excellent, and how different it is compared to similar products on the market.
The unique selling point of your product is something that you should be constantly refining and iterating on, to ensure that you deliver nothing but the best that your investors and clients expect.
With these pro tips, you will have a greater chance of securing a deal at your next fund-raising meeting with venture capitalists.
Most times, although the story of your company matters, it often boils down to the hard facts and figures. This is what most venture capitalists will pay attention to at the end of the day. So do your research and be prepared to take your startup venture to the next level!.