Tips on the Venture Capital Journey
So you need VC funding. For some entrepreneurs, the world of venture capital can seem a bit confusing – perhaps even a bit Game of Thrones brutal. You may be daunted by the numbers and the level of success VC firms represent. You may be dazzled by what they can offer. You may fear what you could lose. So, how should you approach the road to venture capital funding?
In this blog we’ll break things down a little. There’s advice offered by experts on both sides of the fence and they all point to three broad areas of concern for startups launching their rowboats into VC-infested waters.
What should you know about VC?
Perhaps the first thing to take into any venture capital pitch is a firm grip on reality. Most startups will fail to find VC investors. Among those that do, most will fail. Think Dragon’s Den. Scary? Sure. But capitalism is all about risk, and risk management is the key to success. This is business and business has done in stronger, smarter, more experienced and wealthier people than you. Know what you're getting into and if you think you can still win, read on.
Get to know the pitching process
Again, think Dragon’s Den. You are performing for the celebrities of investment. VC bigwigs are usually successful entrepreneurs themselves – i.e. they know a lot more about business than you do. So, don't condescend or dress down your idea; you’re not pitching to Uncle Pete and Cousin Josh at the family Xmas BBQ. Aim your pitch high, but make it understandable – if your potential investors need clarification, they’ll ask for it. Be solid but don't bluff. Cite people and reference figures. Back your claims. Ask for what you need and explain why.
While doing so, be yourself. People are narrative driven creatures and story is essential, not only to our understanding of new ideas, but also to our ability to accept the people telling them. Make your pitch a story. Be active. Be passionate. Show who you are because for most startups, that's all there is; the idea is to sell the idea you conceived. Entertain. Watch Dragon’s Den.
Be prepared. Mishap is only a problem if you don't recover from it. Every pitch is an opportunity to be better at the next one. Computer crashes, audio loss, undone trousers and forgotten scripts are all potentially horrific, but they are also points of differentiation. Take the cue and make it work. Show how you face disaster and colour it positive. You can't control everything, but you can choose to cope.
Know what you’re looking for in an investor
Should you make it through the big door and start talking numbers, you need to have a plan and some set parameters. Look beyond the bling and engage with your potential benefactor. What do they bring outside the dollars? A good investor brings experience, ideas, contacts, structure, advice. Consider whether you get along. Are you compatible?
Know what the investor wants. Read the fine print. Offer what you can but don't swoon at a whiff of success. Caveat emptor. Always.
Plan for the long haul. Your venture capital backer may be with you for a while, so consider what they may bring further down the line. What are you likely to need as you develop? Does this VC have the skill set and the nous to cover your growth? Do they know your industry?
Perhaps most importantly as you start your venture capital journey it’s good to remember that it’s easy to say the wrong thing to wrong person, but it’s hard to say the wrong thing to the right person. If your VC champion is out there, you will find them. Just keep pitching…