December 17, 2012
There are few things more frustrating than having a great business idea, but not the fund to put it into action. One channel that can help you secure the funding you need is venture capital firms. Venture capitalist money can help your business to grow and succeed. However, you have to know how to obtain funding. Venture capitals do not just infuse money into a project. You must convince them that their investment in your project or business will bring back returns. Although it’s not an easy task, it can be done once you go about it the right way.
You cannot just go to a venture capital firm and toss any idea to them and expect to get some financial backing. There are strategies you must follow in order to get the attention and cooperation of the venture capitalists.
You need a business plan. Create a solid business plan. A business plan is more than just a summary of your business idea. It also includes the strategies you intend to implement to make the business successful. It must describe your target market and also who your competitors are, and ways in which your idea is better than the competitors’. Without a strong business plan, you will find it extremely difficult to attract investors. There are several resources that will help you create an impressive business plan. You can visit the website of the Small Business Administration for resources on how to create a business plan. When you are ready to find venture capitalists, you can’t just go with any one you see. You want to look for firms that focus on the type of business you’re involved in. A venture capital firm that focuses on biotechnology, for instance, will not be interested in funding your new line of clothing.
You can make contacts with venture capitalists through accountants, lawyers or other executives who have already received funding from a venture capitalist. Getting personally introduced to the venture capitalist by other professionals who are already clients of the venture capitalist will boost your chances of receiving a favorable response from them. Another effective way to approach a venture capital firm is to get a respected expert in your business sector to introduce you to a venture capital firm. If you can also get this expert to serve on your advisory committee, that would be a bonus. Once you’ve made the initial contact, send them your executive summary for review.
Keep in mind that venture capitalists often want to receive a percentage of the company’s equity. They may also want to have some control on the direction of your company. They are looking to get good returns on their investment. Before you go into a negotiation with a venture capital firm, it is important that you get proper guidance from your lawyer. Have your lawyer on your side throughout the negotiation process. A proficient lawyer will help you negotiate a good deal that ensures that you retain a stake in the control and ownership of your business.