Raising Money: So you are thinking of raising money for your business from Venture Capital firms?

Raising Money: So you are thinking of raising money for your business from Venture Capital firms?

To Get Venture Capital Funding, You Must Begin Thinking Like a Venture Capitalist When Raising Money!

When raising money, think like a venture capital. For many entrepreneurs, success begins with a great idea. However, how do you get this idea off the ground?  Raising money is needed for your company, but how do you attract investors?

Venture-CapitalMany young, emerging growth companies, understand that venture capital serves as an alternative.  Often, venture capital provides cash funding in raising money, which is exchanged for shares in the business and an active role in the enterprise’s future.

In January the National Venture Capital Association, one of the trade associations representing the U.S. venture capital industry announced the results of its industry paper, MoneyTree Report, on venture funding for fiscal year 2012.  The Association with PriceWaterhouseCoopers reported that venture capitalists invested about $26.5 billion in 3,698 deals last year. The report showed declines in both dollar and deal transactions down about 10% and 6%, respectively, from 2011. Fiscal year 2012 was the first drop off in venture capital activities in three years.

Economic uncertainty hindered the growth in new investments. As a result, many venture capital funds shrunk during the year. Venture capital firms have increased fund reserves  to support funding of current  investments and have become more discriminating in assessing new deals.

Understand that before a venture capitalist takes on higher risk the firm will determine the upside pay off. What this means is that the entrepreneur must do his or her homework to meet the expectations of the venture capital firm in raising money.  This is a two-way street.

Venture capital funding comes with a price. Some of the considerations the venture capital firm will review in raising money when assessing a potential investment include:

  • Enterprise leadership.  Evaluating the background, knowledge, and business acumen of the leadership teams is most important. Can the company’s leadership manage the business through the obstacles of a new business?  For the management team, each member should be prepared to explain how he or she would overcome any difficulties and how to get done more with less. For the entrepreneur, be warned that the venture capitalist is going to look into their eyes and ask, “Does this person know how to make money?”
  • Product and Service Offering.  Surprisingly, many venture capital firms say they cannot find good deals.  These firms are in large part, looking for emerging growth companies that offer products and services that can potentially provide a competitive advantage in the market place.  Venture capital firms want to know a lot about the specific industry sector and how the business will effectively compete with the competition.  The leadership must provide a strategic plan that synthesizes the marketing, sales, and distribution tactics that will be employed to attract and retain the targeted customer base.
  • Potential Return on Investment. Know that the venture capital firms are willing to take on high risk, it the potential returns are high too.  If the venture capital believes that the financial up side will be worth the risk, the firm will make the investment. To make this happen, the leadership will want detailed financial projections that are in line with the strategic plan in raising money.

Venture capitalist want to mitigate or manage their risk. Entrepreneurs, on the other hand, can assemble a strong management team, provide a well-written business plan, and show a leadership team that can execute the plan in raising money.

For a free online video course on how to raise money go to: http://garyrushin.com/raising-money-mini-course/

GET BLOG FIRST
Join over 3.000 visitors who are receiving my BLOG and learn how to optimize your business for value creation.
We hate spam. Your email address will not be sold or shared with anyone else.
Be Sociable, Share!

Related posts:

 

Leave a Reply

Featured Box Wordpress Plugin developed by YD

WP-Backgrounds Lite by InoPlugs Web Design and Juwelier Schönmann 1010 Wien