Raising venture capital isn’t the easiest thing to do. Once you have established a need for the VC, how do you go about it?
The very first question that you’ve all got to figure out is – what is the single most important thing that a VC is looking for when you come to them pitching your new business idea? There are obviously all kinds of things such as business models, financials, markets and more. Overall, of all the things that you have to do, what is the single most important thing the VC is going to be investing in?
The answer is People; the right people.
The entire purpose of your VC presentation is to convince them that you are the entrepreneur in whom they are going to invest their money and make a lot of money in return. So, in the course of your VC pitch, you have very few minutes in which you have to convey a whole bunch of different characteristics. What are they?
VCs would like to invest in somebody they know is straight than in somebody where there’s a possible question of who are they looking out for and what’s going on?
Entrepreneurs, by definition, are people who are leaving their existing livelihood, starting a new world, creating and putting their lifeblood into this kind of thing. You’ve got to convey passion. If you’re not passionate about your own company, why should anyone else be? Why should they put more money into your company, if you’re not passionate about it?
VCs like to fund serial entrepreneurs. They believe that even if you didn’t do it right the first time, you’ve learned the lessons, which are going to stand you in very good stead the next time. It could be experience of starting an enterprise, or running something – it doesn’t have to necessarily be a business – it can be in an organization at school, a not-for-profit or anything similar.
You must have domain expertise and along with that you should know your market, who your customers are, how do you reach them, who are your competitors and more.
You have to have the skills that it takes to get a company going. And those skills include everything from technical (if it’s a technology business) to marketing, and sales, and management, and so on.
But not everybody has all these skills. You have got to be able to convince the VC that you either have developed a team that has all those factors in it, or else you possess the same. And you have the charisma and the management style and the ability to get people to follow your lead, to inspire them, to motivate them to be part of your team.
A VC would want to test the water with you. He wants to be assured that you are going to keep his money alive and you are going to make more money out of it. They would not like someone who’s going to cut and run at the first opportunity. They are looking for someone who understands that bad things happen, but you are still committed to be there to the very end.
You have to know what is going to work for you, where is your business going, what are the deliverables and how is it going to make a difference in the world or society?
Although changing the world seems a great idea, but VCs are aware that it doesn’t always happen and the entrepreneur should be aware of it too. Before you get to change the world, bad things are going to take place and you have got to be able to deal with that. You need to have rational projections and stuff to make it a success.
VCs do tend to pick candidates that they think can be coached. They like someone who has the ability to listen. People who are VCs or angels investing in you have had the experience and they’d like to know that you want to hear that experience.
Now, you know what kind of people are VCs looking to invest in but does that guarantee you investment? Maybe, maybe not! There are a lot of other things that matter when you are preparing to pitch a VC. Keep watching the space to know: “How to get VCs to open their wallet for you?”