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How to raise Venture Capital

November 11, 2010

Raising venture capital is a step that most entrepreneurs will encounter at some stage of the growth process. And the most important aspect of raising venture capital is the pitch. The pitch is often compared to the dating process, where the first impression is the clincher. So, once you’ve finally managed to set up a meeting with your prospective venture capitalists (VCs), here are a few pointers to keep in mind:

1.Be aware of the process: No matter how new you are to the pitching process, go in with complete research and understanding of it. All VCs expect you to know what you’re doing. Read everything you can and get ready to answer tough questions with some very good answers. The probable ones are, “Is the market big enough?” or “Is your company really worth that much?” or “Can your idea be replicated quickly by other companies?”
2.It’s all in the pitch: A great pitch is not necessarily a clincher, but it sure sets the impression and the tone for future meetings. A venture capitalist uses the pitch as a gauge for everything about you and your company. It is more than just facts and vision; a pitch also displays your passion toward your enterprise. Most venture capitalists use this time to pick up signs on your personality, confidence, knowledge, intelligence and even your ability to lead your startup to success.
3.The presentation: A PowerPoint presentation of approx 10-15 slides will help you make a decent one. You could also use Guy Kawasaki’s rule of 10-20-30. A 10-slide presentation that takes approximately 20 minutes and uses a font size of 30. Your presentation should cover several questions that are often expected by VCs like what your business plan is; details of your product, your market and why you have the competitive edge. It can also address questions like why are you raising capital, how you will invest it and who makes up your team.
4.Showcase your product/service: One of the most powerful ways of showcasing your product is by displaying it to the VCs at the pitch. Take along your product if you have a prototype or a working model. Not every company may have such an obvious way of demonstrating its product during the funding process, but you could find other ways of doing this.
5.Approaching VCs: While you may get an appointment with a VC through a cold call, it always works better if it is arranged through an introduction from someone who the VC knows and trusts. The more credible the introduction, the more likely you’ll get a response from the VC. Thus, networking plays a big role in finding the right people.
6.Background research: Do your homework on research firms and the companies they have backed. During the pitch, make known that you have taken the effort to know about the background of the VC as well as the history of the company and its previous funding patterns. This will help you personalize your pitch and show that you care about working together.
7.Display frugality: Make it known to VCs that you have got by with using minimum resources so far. This shows your prudence while running your business. The amount you’ve used so far determines your approach to the investment that will come in.
8.Have an exit strategy: It’s important to know who will buy you when the time is right. Most VCs are looking at who will acquire the company they invest in and for how much as this is the ultimate test of their investment. Thus, have a list of probable buyers in mind and talk about this during your pitch.

This approach needn’t only be used for Vcs, but also for angel investors. All these points together will enhance the prospects of bringing in money or business from different avenues. So think smart and be prepared to go for the kill!

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