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November 21, 2012

How to Convince Venture Capitalists to Invest in Your New Business

Professional venture capitalists are always on the lookout for new investment opportunities, but convincing them to invest in a new brilliant idea isn’t as easy as it sounds. Even if you have a great idea for a new business, you need to back it up with a solid business plan and realistic financial projections. Your idea must be ambitious, but it also needs to make sense in today’s market. Some ideas that are great in theory are completely impractical in real life. Your plan will get shut down by most venture capitalists immediately unless you show that it has real potential to grow into a highly profitable business.

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Before you contact venture capitalists, spend some time on creating a professional business plan. When meeting with new entrepreneurs, most venture capitalists want both a detailed business plan and an impressive presentation. Your business plan needs to outline what type of products or services you plan to offer, how you plan to attract customers and why you believe your idea deserves funding. Back everything up with real facts and statistics. If you’ve never written a business plan before and don’t know how you need to format it, you can download sample templates online. Remember not to go overboard with details and descriptions. Include relevant information, but make sure that it’s easy to find and understand. You can expand on the details in your business plan during your meeting or presentation.

Venture capitalists want long-term returns, so your ultimate goal is to prove that your business has the potential to go big. The best way to do that is to present a great marketing strategy combined with promising profit projections. You have to know who your target demographic is and how you will effectively reach the type of people who are most likely to buy your merchandise or services. High demand is one of the most important aspects of building a solid foundation for your new business. Venture capitalists want to know that your business will be useful to consumers in your area. Do your research, and present accurate facts that show why local consumers would be interested in your business. In addition to market research, make sure that you are ready to discuss how you will advertise your business to get new customers and establish a presence in your community.

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One of the biggest mistakes entrepreneurs make when presenting to venture capitalists is making their business plan sound bulletproof. New businesses are risky by definition, and venture capitalists already know that yours won’t be an exception to that rule. If you completely ignore potential problems, investors might wonder whether you would be ready to deal with them if they happen. You need to show that you are capable of dealing with issues like slow growth or competition. Highlight potential problems and immediately provide smart solutions to prove that you are knowledgeable enough to deal with unexpected curveballs effectively. When meeting with venture capitalists, always keep in mind that they are not just shopping around for promising business plans. They are also looking for reliable, professional entrepreneurs who understand what it takes to develop and grow a profitable business in today’s tough economic market.

Peter

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