1. Understanding your business is key.
Venture capitalists will pick apart your projections, operations and vision. You probably already have a great instinctive feel for your business, but the challenge when dealing with VCs is being able to succinctly articulate this. Keep in mind that VCs are financiers, so the ability to talk about your operations, growth and other aspects of your business using numbers is critical to impressing venture professionals.
2. Know when to raise capital.
It seemed to me that VCs became most interested once my business has started to “prove” that there was a market for our service. The venture capitalists I spoke with talked about looking for companies where the injection of capital would change the trajectory of the business.
3. Prepare for a long slog.
Raising venture financing is like taking an additional job. The amount of effort and time required was amazing. I recommend treating the process in the same way you approach making sales. We kept very careful records of who we were speaking with, when and the right follow-up items. Since so many of the meetings are similar, with a similar set of questions, having one place where you keep all information is important!
4. Approach VCs the right way.
Venture investors are looking for great teams. One way to prove to the VC that you are a top-notch entrepreneur is to get introduced to them by people the VCs trust. Venture capitalists will be much more interested in your business if they are introduced to you by someone they know. The best “warm introductions” are from successful entrepreneurs/executives.
5. Practice your pitch.
We had a 15-page PowerPoint presentation that we used to pitch VCs. By the end of the process I had cut it down to 12 pages and could deliver it in about 15 minutes. Since most investors give you between 30 minutes and an hour for your first meeting, you need to be very concise in delivering your message.
6. Have due diligence materials ready.
We put together projections, operational stats and related legal files (as recommended by our lawyer) in one place online so that we could share the information with interested investors right away. We worked hard to keep momentum going when investors showed interest.
7. Hire a good lawyer.