Knowing what venture capital firms want to see rather than what you want to show them is essential to build trust and to controlling the initial discussion. Irrespective of whether you are looking for $100,000 or $10,000,000 your collateral will typically need to include
- Company Background
- Details of Service
- Financial Model
- Management Team
- Executive Summary
- supported by any and all of:
- marketing plan
- marketing collateral
- operating plan
- website screenshots
- detailed management resumes
- organisational structure
- supplier list
- terms of business
- press coverage
- market research
- investment requirement
- exit strategy
Beyond The Obvious (Seductive Rapport)
OK, you have the basics, how do you create a siren call not a whimper to your proposition? Here is a collection of insights from over 75 businesses that have been recently funded. Pick those that best suit you:
- Tell investors about the quality of the product/services and how it helps dramatically improve people lives, the communities they serve and the world we live in
- Tell investors about the credibility and success track record of the company’s principals, not forgetting lessons learned from past failures and response to highly ambiguous situations
- You need a story about the brand. What does it stand for? And a chapter of the story is about value in potential markets, not just growth in current markets
- You have to create a human problem fixed, a human need satisfied, a human spirit kindled.
- You may not be able to find an investment guy’s heart but you can find the public’s soul (affiliation, challenge, collegiality, excitement)
- The principals experience with failure and what they plan to do if this doesn’t work.
- Demonstrate the firm’s principals have skin in the game including “love money” (family, friends and associates)
- Bring hard evidence: contracts with customers, letters of intent, memorandums of understanding, and other formal documentation to show customer interest.
- Talk about supplier relationships, history, stability, scalability. Failure might not be your fault but equally, you need to have both preventative and contingent actions in place for obstacles that arise from your relationship with your suppliers.
- Proprietary intellectual property, demonstrate trademarks and patents.
- Sustainable competitive advantage, where is your evidence?
- Can your investment proposition be tailored to suit the audience? Investors come in different shades of grey, your flexibility is paramount to drawing them in.
- Exit strategy, what is it precisely?
- Board positions for major investors, who is the ideal Board member (skills, behavior, expertise)
- Common shares convertible to preferred shares if targets aren’t met.
- Industry specific risks: government and political risks, regulation, distribution, security criteria, foreign interests and so forth.
“Basically, more than two and half sides of paper and enough to give a full flavor of the proposition. VCs will see dozens of plans each week and the key is to demonstrate that you know what you are doing and that includes how you will make your investors rich!”
If the mere thought of generating this information leaves you cold or exhausted, you can confidently rule out soliciting help from or expecting support from venture capital firms.
James Berkeley is a global expert and adviser to corporate venture capital, venture capital and High Net Worth investors seeking dramatic growth investments. He is great at and passionate about turning strategic visions into an organisational reality, beyond merely raising capital. James provides expertise, speed and tremendous results for owners and top management in high-growth businesses who want to soar, not simply coast. He is known for his Profitable Growth Regime. A pathway that brings greater focus and discipline to all levels of the firm and greater resolve to see that key business goals are attained with minimal need for management intervention. James’s wisdom has been sort by the owners and key personnel in an array of early and mid-stage high-growth businesses during his career including HotelCloud, Coffee Planet, FTT Global, Napster and Direct Money. Website: www.elliceconsulting.com Blog; www.jamesberkeley.com