Wednesday, 9 July 2014

How To Raise Funds Through Venture Capital Funding?

Watching your friend sucessfully raising venture capital has motivated you and now you are also looking forward to get a venture capitalist to invest in your startup. Great! It is quite justified for the venture capital funding to gain so much popularity as the money provided by the VCs is far more than any other source of capital. But convincing these professional investors is a tough nut and that's where entrepreneurs are mostly out of their depth.

Well, there's no need to get discouraged, as this method of statup funding is tough but not impossible. But from your side, you have to be very sure that you want to raise venture capital for your startup. Whether you will be able to raise it or not will come next but unless you are mentally prepared for venture capital funding, it will all be a wastage of time and energy. Also, while approaching for venture capital funding, there are three most important things that have to be taken care of - research, attitude and network.

So, here's how you should approach for venture capital funding.

Research Well For The Right Investor

See how the venture capitalists perform their research before adding a company to their portfolio. Similarly, as an entrepreneur you also need to research well before choosing the right investor. Thankfully, you have internet at your rescue. Explore the web, check out the websites to find out whether their investment strategy fits your business proposal or not.

If yours is a seed-stage startup, it is advisable to look for the local investors first as they are easy to get access to and will also make it easier for you to convince a distant/foreign investor to invest at a later stage in your company. You have to understand their mindset. Investors in the venture capital firms find it reliable to invest in an investor-backed company. So once a local investor invests in your company, it greatly increases the value of  your business. Try to build a strong network and get hold of a person who can introduce you to of these investors. The venture capitlists trust such referrals and consider them as ideal investments. Before anything else, it is about trust as the investment involves huge risks.

Also, research well about their industry preferences like whether it technology, telecommunication or infrastructure or any other industry they are interested in. Approaching an investor not interested in your industry vertical would be nothing but wastage of time.

Keep The First Meeting Crisp And Powerful

Your first meeting with the venture capital firms should be such that the investors should get curious about your company and suggest for a second meeting. If that happens, you should consider that as your first step towards success. No need to go for a detailed narration at the first meeting. You just need to present your idea as a lucrative investment option. So basically it is all about presentation based on which the investors will decide whether they should proceed further with your company or not. And it won't take much time; within a few minutes they will realize how far they woud like to go with the deal. So you know how critical the first meeting is.

It's Time For Your First Pitch. Are You Prepared For It?

For venture capital funding, everything needs to be just perfect. Prepare your first pitch as if it is your last pitch on the earth. It should provide the investors with a 360 degree view of your business - length, breadth and height, everything should be crystal clear. I mean to say, it should include your business plan, the market oppotunity, market traction, expected turnover, your competitors, your team, the business model, just everything that the venture capital firms would like to know. The mangament team in your company should be the greatest attraction. Investors rely only on companies with a highly-efficient management team comprising of smart, hardworking, passionate, commited and confident members.

Also, it would be great if you can quantify the capital you need, say for your equipments, office space, market launch or expansion. It adds great value if you can prove your efficiency in the matters of finance. The venture capital firms gain the confidence that your company will spend the capital at the right place which will boost the productivity resulting into higher profits.


These are the most important things that you need to take care of while raising venture capital for your startup. These things look simple but once you get into the field, you will realise what all it takes to convince a venture capital firm. But then, it's not impossible again. You have to ensure no matter what it takes, you are willing to work with these investors. When it comes to venture capital funding, sharing the ownership often becomes an issue. If the fear of losing your control over the business haunts you every now and then, it is good to look for some other funding option. Other than this, it's all fun working with the venture capitalists as you get access to so many value-added services along with guidance, knowledge and contacts apart from the much-needed capital.

Are you still apprehensive about raising venture capital? For any assistance, feel free to visit us at mergeralpha

No comments:

Post a Comment