I was in the private equity and business finance industry prior to my business consulting career, and I learned a lot along the way in what makes for a successful Venture Capital campaign. Here are some typical mistakes to watch out for and some great tips to helping implement a successful Venture Capital raise.
Common Mistakes in a Venture Capital Campaign
- High Gloss business plans with lots of graphs, charts and pictures, with not a lot of substance. Wow, I see these a lot. And sometimes they even come from an MBA which people think lends credence. It doesn’t. Go for quality information and substance, verses the glossy plan with lots of pictures and subpar reasoning and substance. Use pictures and graphics to make your point, not for looks.
- Relying too much on an intermediary or broker. VC wants to know how you think. Use a Business Plan Consultant to help you develop a Business Plan, VC Proposals, Investment Overviews, Loan Packages and a Financial Strategy. Use an experienced Loan Broker, specializing in VC, to introduce you to VC networks. But you approach and negotiate (with the help of a Private Equity Law Firm) with VC. They are principally interested in you, the entrepreneur, the founders and management.
- Not confident. Confidence in your opportunity shows character- a major decision making ingredient for VC.
- Shop the deal overly. Find the 5 best VC firms for your deal and approach 2 to 3, one at a time. Excessive shopping dilutes a deal’s attractiveness.
Tips for a Better Venture Capital Campaign
- Hire an experienced Business Consultant from the very early stages of founding your Company.
- Develop a Financial Structure & Plan and correlate the Plan to a Strategy in identifying and approaching VC Firms.
- You really want a Venture Capital company that will bring more than money to your company. Look for added value, which includes connections, resources, partnerships, etc in your markets and industry.
- Experienced Management Team, backed by solid track records and successes. “Sell” your Team.
- Develop a Comprehensive Business Plan so your Business Concept is well developed. Then develop a Funding Business Plan customized to the particular VC group you are approaching.
- Be able to articulate your opportunity in 2 minutes. Then VC might give an opportunity at an initial 30 minute presentation.
- Developed Product Plan, Marketing Plan and Strategic Plan so you can demonstrate realistic, quantitative data and projections.
- Highly defined, developed Market Niches.
- Demonstrate Competitive Edge and Barriers to Entry.
- Minimize Risks: Strategic & Investment Risks.
- Grants of Stock may be the structure which Investors prefer; however, this structure can dilute your ownership significantly, while giving up some control in your Company’s decisions (depending on the number of stock granted). By contrast, options can be used to battle the dilution and control factors, yet still make an Investor happy. Options are just as valuable as stock; can be issued in agreed amounts; and the Investor participates after the money is invested based on the agreed option price- this aligns the Investors returns with performance.
- Be flexible with negotiations. Have your Private Equity Law Firm do a run through VC Role Negotiation Session to prep your negotiating skills.
- Look for a VC’s track record and research their funded companies. Does this meet your expectations and requirements?
About The Author – Frank Goley with ABC Business Consulting
Frank Goley has an experienced background as a business consultant, business turnaround consultant, business plan writer, business plan expert, small business consultant, business coach, business plan consultant, marketing consultant, business planner and online marketing consultant, and seo consultant for ABC Business Consulting. He has been helping companies to succeed for many years. Frank wrote his first business plan over 20 years ago. He is an expert in developing business plans, marketing plans, funding plans, strategic plans, turnaround plans, web marketing strategies, and project specific business plans. Frank is the author of a business plan book, The Comprehensive Business Plan Workbook – A Step by Step Guide to Effective Business Planning, and he has over 50 published articles and e-books on business success strategies. He also writes the Business Success Strategies Blog and publishes the Business Success Newsletter.