June 29, 2010
Who else wants to raise venture capital?
Watch this free presentation to learn the #1 secret to getting millions for your ideas.
There are as many kinds of venture capital firms as there are kinds of business. When pursuing venture capital for a new business, seven key factors determine which venture capital firms are worth contacting.
1. Proximity to Your Business Headquarters
Most venture capital firms only work with businesses whose headquarters are located within 200 miles. This allows for more frequent and easily scheduled meetings, which in turn facilitates a closer partnership as you pursue steady growth and a tidy exit.
2. Similar Sector Preference
VC firms tend to focus on one sector each. This allows them to maintain and build on focused knowledge of all businesses they fund. So if you are a wireless technology company, focus your own fundraising efforts on firms specializing in the wireless technology sector.
3. Similar Stage Preference
VC firms vary in their fundraising stage preferences. Some prefer to invest early, when risk and potential payoff are high. Other VC firms prefer to bridge capitalization gaps just prior to going public. Therefore, focus your efforts on VC firms who prefer to work with whatever stage your company is in.
4. Partners with Experience in Your Sector
VC firms are comprised of individual partners with experience in the sector the VC prefers to fund. For example, a VC firm specializing in the healthcare sector will have healthcare professionals on their team. This allows the firm to make educated decisions on which businesses they fund â€“ and enriches the wealth of knowledge you will have to draw on when that firm helps you grow your business.
5. Portfolio with Similarities to Your Business
VC firms often ask the companies they are currently funding for advice on which other businesses to fund. Therefore when seeking a VC firm for you, take a look at their portfolio. Are they similar enough to yours that they will have the expertise to explain how your business will benefit the VC firm?
6. Deep Assets
You will go through multiple rounds of capital as you move through the stages of fundraising. The first round may last you a year or five years, but chances are you will need more capital later on. Therefore it is wise to pursue VC firms with â€œdeep pocketsâ€ so that they can fund you again if they so choose. That way you will not have to seek new VC firms for future capitalization.
7. Personality Fit
As the VC firm funding you will be advising you as you grow your business, you will need to be able to work with them on a personal level. That is one reason why there are so many meetings and â€œwooingâ€ prior to funding: to make sure your management team and the VC firm can work together.
Finding the first VC firm is the first stepâ€¦ But then you have to â€œpitchâ€ them and convince them to fund you.
Watch this free presentation to discover the proven â€œformulaâ€ for pitching venture capitalists.
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