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August 1, 2011

The Ten Steps Required to Raise Venture Capital

When you want to obtain venture capital, your first two steps involve developing your business plan and marketing materials. Next, you’ll need to utilize a venture capital database to create a targeted list of VC firms to contact. Then, you’ll be prepared to progress through the remaining steps. The ten steps required to raise venture capital are:

1. Conduct your research and then write all ten sections of your business plan. These sections are the Executive Summary, Company Analysis, Industry Analysis, Customer Analysis, Competitive Analysis, Marketing Plan, Operations Plan, Management Team, Financial Plan, and Appendix.

2. Develop your remaining marketing materials, including your teaser email, high-concept pitch, elevator pitch, and investor slide presentation.

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3. Purchase and use a comprehensive venture capital firm database to create a list of VC firms that might be interested in your business. Narrow your list to a targeted subset of firms by entering parameters such as sector preference, stage preference and location.

4. Ask your business associates, family members, friends and other members of your network to introduce you to venture capitalists.

5. Venture capitalists are people, and they attend cocktail parties and other social gatherings as well as industry events. Be at these events if you suspect some VCs will be present.

6. Send your teaser email to make contact with your targeted venture capitalists. Set up meetings so you can deliver your slide presentation. By contacting your target VCs at roughly the same time, you can create a sense of urgency and competition for funding your company, and this can give you better funding terms.

7. Deliver your slide presentation to every venture capitalist that agrees to a meeting. Give the people attending copies of your business plan to keep. Make as many presentations as you can, as quickly as you can, in order to continue the sense of urgency and competition among the different venture capitalists.

8. Contact every venture capital firm that shows interest in your business. Attend any meetings that are set up to discuss the funding terms the venture capitalists propose.

9. Venture capital firms that are seriously considering investing in your company will give you term sheets. Engage an attorney to review these terms and identify the best deal. At the same time, the venture capital firms will be doing their due diligence reviews on your company, so ensure that your financial projections are both accurate and realistic. They’ll also conduct background checks on the members of your management team.

10. The Stock Purchase Agreement is the legal agreement which sets forth the final terms between your business and the venture capital firm. Your attorney must review this contract thoroughly to make sure its terms are as favorable as possible for your company. Sign it once you’re satisfied.

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After following all ten steps, work closely with the venture capital firm. Doing so can help your business grow and ultimately allow everyone a financially rewarding exit.


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