Venture capital - how to get support from an investor?

Service Business

By taking advantage of the opportunities offered by venture capital, a company can gain not only an injection of money for the development of innovation, but also an invaluable transfer of know-how. In such a system, both parties want the greatest possible success of the financed company - for the capital provider it is more an investment than a loan, because it counts on certain profits in the future and therefore is able to put as much as possible into a given undertaking. Therefore, small and medium-sized enterprises, which have a stable position on the market, a fairly high growth potential and an idea for development, should seriously consider venture capital among all available forms of financing.

What is the procedure for applying for support from venture capital funds? What is worth remembering when reporting to an investor? What arguments will help convince the capital giver that it is worth investing in the presented venture?

Is venture capital for my company?

When considering venture capital funds as a method of raising capital for the development of your business, the first thing to understand is the name. Venture this is a risk from English, so in free translation venture capital stands for risky funds, venture capital.

It is indeed so. Venture capital companies (TVC) are approached by companies with potential for which it is virtually impossible to obtain, for example, a traditional bank loan - precisely because of the high risk of such an investment. Thus, it can be assumed that venture capital funds are intended for companies whose development is burdened with a high degree of risk.

However, venture capital is not a charity. When investing in enterprises, TVC is expecting a profit, and not a small one. Therefore, in order for a company to have a chance to obtain this type of support, its idea must have exceptional growth potential that will compensate for the risk of investment.

On the other hand, for investors, the industry in which a given company wants to develop, or its "age", is slightly less important. Companies using venture capital support are unique ideas, therefore it is difficult to determine when it would be best to allocate investors' capital in them

The first contact with a venture capital investor

Therefore, if the company's management decides that it is worth trying to get support from venture capital funds, it should start by introducing itself. It cannot be done in person - to become a potential ward of the society, you should start by giving them an investment teaser.

An investment teaser, also known as an executive summary, is something like a corporate resume. Thanks to it, the company has a chance to introduce itself - both in the most formal and a slightly more advertising sense. Therefore, the teaser should contain a description of the company - its history, current situation, plans and assumptions for the future. Since the idea must be innovative and original - it is worth presenting a step by step vision of how the business will develop.

It should not be forgotten that the company is primarily people. Investors must be sure that their funds will go to those who will use them wisely and most effectively. Therefore, it is extremely important to present your staff in the teaser.

At the same time, apart from the company itself, it is worth taking care of the market description. No enterprise operates in a vacuum - it depends on suppliers, customers, competition, as well as international relations and global technological development. Knowledge of the company's environment, appreciation of its possibilities, but also a real assessment of threats is a sign for a potential investor that the owners have the necessary knowledge and competence for the further development of the company.

The best investment teasers are those that were created on the basis of a well-made business plan. However, it is worth paying attention to the phrase: "based on". In order for a business plan to be correct and - most importantly - effective, it must be really very detailed, developed with details. Therefore, these documents are usually really voluminous. However, in the initial phase of selection, TVC analysts are not interested in details - moreover, they do not have time to consider each project from start to finish. Thus, sending a detailed project at the beginning is pointless - just as when recruiting staff, lengthy CVs are rejected due to lack of time, in this situation, documents that do not meet the requirements are unlikely to be read.

So what to do? Extract the most important, specific and eye-catching information from your business plan - and include it in a teaser. Then it remains only to wait for the second step, i.e. ...

... meeting with a venture capital investor

Entrepreneurs who have high hopes for the development of their companies in venture capital will certainly react with joy to the news that investors have become interested in their project. After the initial euphoria, however, many business owners panic at the thought that now everything depends only on themselves - namely, how they present themselves at the first presentation meeting.

In practice, the introductory presentation does not differ that much from what is contained in the teaser. It is worth preparing yourself again from the description of your own company, slightly extended with data on the staff, financial analysis and other aspects that have the greatest impact on the profitability of the venture. All kinds of visual aids are also helpful - for example, a classic multimedia presentation will work here, however, what is important - it must be prepared really carefully, harmonize with what the presenter tells about and be interesting. The presentation, which consists of slides filled with continuous text, not only will not interest investors - it also proves the lack of creativity, which should be as much as possible in a creative business.

After the presentation, be prepared for questions from investors. The specialists analyzing the company thus have the opportunity to make sure that the representatives standing in front of them really know what they are talking about, they are specialists who know their industry and their own plan of action. It is only when they become so sure that the final stage before signing the contract is reached, namely ...

Venture capital - negotiating terms

An invitation to negotiations is a sign for an entrepreneur that investors have chosen him, but on the other hand, getting support from the fund is still not certain. This is where two goals meet - the investor and the entrepreneur, the first wanting to secure their own capital as much as possible, the second needing a fund, and both seeking profit.

Negotiations are not an easy stage - a company may have excellent speakers, well-prepared presenters, excellent staff ... but venture capital has negotiation specialists. They are trained people, with great experience and awareness of how risky this type of investment is, and therefore you cannot compromise. On the other hand - both TVC and the company want to generate profit together, the basis of which is investment capital on the one hand, and on the other - an innovative, creative idea of ​​a young company.

Therefore, when entering negotiations, entrepreneurs must be aware that TVC's offer is a great opportunity and it is worth making concessions to fight for it. On the other hand, it is necessary to remember that they also do not come empty-handed - on the contrary, they have an idea, a valuable company and enormous potential. It's important to use it well.