To get a venture capitalist to invest in your startup business, you need to first qualify for it. It is important that your company has a management team because this is one of the factors that they look for. A management team is more important to them than the service or product the business sells.
What is a Venture Capitalist?
Venture capital is private equity, which is a business funding that is invested in private companies for a percent of ownership in return. Investors with a high net worth invest in private companies who will get them a high return in a small amount of time. There are institutions of investors that partner up to for a venture capital firm. These investors will get together and put their money to create a venture capital fund. This money is used for investing in high growth startup businesses.
Venture capitalists are different than angel investors. Venture capitalists prefer to invest large amounts in their privately owned companies, whereas an angel investor is an individual or a small group of investors that invest smaller amounts on into the startups. The main difference between them is the amount the invest in the startups.
Venture firms like to invest in innovative, low to high-risk businesses that have high rewards. Ideally, they want to have high returns in a short amount of time.
How Do Venture Capitalists Choose the Businesses to Invest In?
The following factors are considered by venture capitalists when selecting a business to invest in:
- A good management team
- A proven business model
- Sell a widely used product or service
- Large target market
- Viable industries only
- Have revenue projections that make sense so they can determine their return on investment
- A concise business plan with financial projections
How to Get Venture Capital Funding
Venture capitalists take risks on businesses who bring more than just innovative ideas. They also want to have risk takers with a solid foundation. They also want to work with businesses who is going to give them a large profit. The process is rigorous and they will go through the details of your business plan and see how successful you have been prior to them.
How to Perfect Your Venture Capital Pitch
Having a strong pitch is extremely important to get approved for venture capital funding. It is your chance to have a few minutes to impress the investors. When you are putting together your pitch, there are a few things you should keep in mind to make your business attractive to a venture capitalist.
- Be honest: do not exaggerate or try to do what you think they investor wants.
- Tell your story: tell your reason and what keeps you invested in your business.
- Share your strengths and weaknesses: discuss the accomplishments and the areas that could use some work.
- Know your financials: know your revenue, your profit margin, how much you need and how you plan to use it.
- Share your vision: communicate your vision of your business for the future. Share your long-term business goals and what you are expecting from the relationship between you and the venture capitalist.
The Bottom Line
Venture capitalists do not just invest in businesses, but they help build them. When you work with a venture capitalist, you will receive more than funding. They help you get to where you want your business to be and want the biggest return on investment in the shortest possible time.