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August 3, 2010

7 Steps to Raising Venture Capital

Need venture capital?

Watch this free presentation to discover the #1 secret to raising venture capital.
From your initial search for a venture capital firm to receiving your financing check, these are the seven steps to raising venture capital, broadly stated:

1. Create the following five VC marketing and presentation items:

  • High concept pitch – A phrase describing your business by mentioning a familiar company, followed by the twist that differentiates your company. Allows you and others to communicate what your business does, quickly.
  • Elevator pitch – A one- to two-minute pitch explaining: what your business does, how it makes money, and how it benefits customers. Incorporate the high-concept pitch. Throw in a fact or two showing a large and growing market for your product or service. Helps you to create investor interest quickly.
  • Teaser email – An invitation to a VC to invest in your company. Includes the same types of information that appears in your elevator pitch. The purpose of the teaser email is to entice investors to meet with you and fund your venture.
  • Business plan – The all-important document “selling” your business to investors and/or lenders, to entice them to meet with you and fund your company. Includes an Executive Summary, Company Analysis, Customer Analysis, Industry Analysis, Competitive Analysis, Marketing Plan, Operations Plan, Management Team, Financial Plan, and Appendix (supporting materials.)
  • Slide presentation – A 20-30 minute pitch to investors, the purpose of which is to create more interest in your business and build a relationship with the VC.


2. Build your list of qualified venture capital firms.
Use a comprehensive VC list-building tool such as VCgate. Research each firm to determine whether they are a good fit for your company. The firms on your list must be based within 100-200 miles of your business; prefer funding businesses in your sector; invest in businesses that are at your stage in the funding process; and actively investing.

3. Contact the partners whose professional backgrounds most closely resemble your business. Ask friends, family, associates, and mentors for introductions to VCs they might know. Use online and offline networking to initiation contact with VCs yourself. Send your teaser emails to your target partners at your target firms.

4. Give your slide presentation after a venture capital firm agrees to meet with you. Answer their questions about your financial plan, customer analysis, competitive analysis, and management team. They will try to poke holes in your plan, so you will have armed yourself with all the knowledge you can possibly gather. Stay in contact with the VCs. Continually supply them with any pertinent new information about your business as it arises.

5. If and when you receive a term sheet from a VC: You are in the home stretch. Review the terms with an eye to preserving your stake in the company. You absolutely must hire a lawyer to help you review the term sheet and negotiate the best possible deal for yourself. Just remember that you need funding. A ten percent share of a $10 million company is better than 100% of a $500,000 company.

6. If and when you receive your financing check: Continue to carry out daily operations to serve customers (short-term processes) and strive to meet or exceed milestones (long-term processes.)

7. Look to the next round of funding. The #1 reason business fail is running out of cash. Remember, black ink in the accounting books does not necessarily equal cash. Seek either to solicit more funding from your current VC firm, or reach out to new firms. Always be fundraising.

Watch this free presentation discover the #1 secret to raising venture capital.

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