There’s an old adage that when someone says it’s not about the money, it’s about the money. Venture capitalists live by this belief and pose a serious challenge when entrepreneurs come looking for funding.
If you plan on facing a team of hard-boiled venture adventurers, you best know what to do and say. Perhaps even more importantly, know what NOT to do and say. There is tremendous competition for X amount of investment dollars in the start-up marketplace and entrepreneurs too often sabotage themselves in their investment pitches. Be confident, be prepared, and be ready to justify your start-up as a worthwhile gamble to the folks with the money. Imagine yourself going on a Broadway audition and presenting to a team of the industry’s most acclaimed producers. You’ll need to be honest and forthright, but still tell them what they want to hear. Explain your opportunity thoroughly, and how it will make their money grow, while considering the following points:
Greed Isn’t Good
Wall Street icon Gordon Gekko believed that greed was good, but that was back in 1987. The investment world has changed dramatically since then. As you sell your entrepreneurial opportunity, guard against being perceived as greedy. Venture capital is not a lottery ticket, nor is it quick financial fix. It is a measured, albeit calculated, economic risk that venture capitalists are willing to take. If you come off as wanting too much of the pie, you will get none.
Your Venture Capitalism Pitch: The Most High-Stakes Speed Date You’ll Ever Go On
Never appear desperate to venture capitalists, and remember that there are many more where they came from. Both sides have priorities and needs, and there must be a correct fit between the two. If the chemistry isn’t there, it’s best to move on as it will assuredly cause problems in the future. Think of your presentation as a round of speed dating: if it doesn’t feel right or look right, then it isn’t right for you.
Prepare and Prepare to Pivot a Strategy
Keep your options open, as the future is highly unpredictable. When looking for capital, think about today, as well as tomorrow, and maintain a flexible idea for your possible exit strategy down the road. There may come a time when you decide to take some money off the table. Leave nothing to chance or fate by doing your number crunching before, rather than after, the fact. Thoughtful preparedness now may pay significant dividends later, literally and figuratively.
Don’t be put off by an initial negative response. A “no” today may not be indicative of future considerations, and venture capitalists might see your start-up in a different light at a different time. There are a multitude of factors involved with securing seed money — from financial market conditions to entrepreneurial ebb and flow to political turmoil. These often varying and sometimes intangible factors can affect venture capitalists’ decisions, pro or con. Even faced with a thumbs down, you must remain confident with your idea, and look to refine it as necessary.
Remember, have a game plan for evaluating your venture capitalists as they do for you. Know what to say before they ask, and know what not to say if they ask. Above all, believe in yourself and your entrepreneurial opportunity. Whether the venture capitalists’ answer is yea or nay, you can stand tall and look toward the future. Once you are able to receive funding from your first investor, launch your new business into a startup success story armed with this collection of entrepreneur resources.
E.J. Dealy is CEO of The Company Corporation, which provides affordable incorporation services to entrepreneurs and small businesses nationwide. In addition to filing corporations and limited liability companies (LLCs), The Company Corporation offers a wide range of products and services, including license and permit assistance, corporate kits, business education books, certificates of good standing, and more. The Company Corporation does not provide legal, tax, or financial advice. Website URL: www.incorporate.com