Entrepreneurship is all about taking calculated risks and enjoying commensurate rewards. Identifying and then stating the need for a business project and making an irresistibly lucrative proposal to a Venture Capitalist (VCs) with whose money you will launch, grow and sustain that business may be entrepreneurial competency. Choosing to fund it is the prerogative of the VC. Just as you expect a return from your business, the VC expects a return from the business where he is putting his money.
When you set out to do your own thing, often a tremendous amount of research goes into it - so much that you suffer from an information overload. Not all the information is useful, and often, it is also incomplete. However, all information culminates in the fact that you need business acumen to design a business and money to run it. The relationship between the VC and the funded organization is like a marriage - compatibility to start the relationship and balance and adjustment to sustain the same. If things work out better than expected, it is a pleasant surprise, but if they do not, then there should be a logical way of ending the relationship with the least amount of pain.
Money must beget money. The VC must gain by funding your business. You need to promise, and then plan to deliver on that promise. Your entire demeanor, plan of action, business projection should convince the Venture Capitalist (VC) that investing money in your business would give him a handsome return on investment (ROI). That is what will make the Venture Capitalist sit up and take notice. After all, that is also your imperative - to make money. So you have a common goal.
There are two facets to pitching your company to a VC. One when you project your company to the prominent VCs in the hope of getting their attention to fund or incubate your enterprise. Two, having found your company as a suitable funding target, the VC tries to woo you into accepting his funding. The former is more likely than the latter in these times when economies quake at the markets’ whims; but for a win-win deal, both are essential.
Be an informed shopper. Just as the VC is checking you out, you need to exercise your right to check out the VCs in the market and their reputation. After all, the relationship you are getting into is not a one-time connect - it will mean working together over a stipulated period.
Don’t oversell yourself. But believe strongly in what you are doing - passion is a strong positive when developing and forging a relationship.
Believe in precision. Create a detailed business plan to start with, outlining objectives, timelines, communication imperatives, targets, team building, First Person Responsible (FPR), and financials. All financials need utmost clarity and must be succinctly stated on the proposal and then the agreement.
Have a good management team in place when you pitch. It can be a very attractive proposition to the VC if you can convince him that the business will be driven by an excellent think-tank.
Expect queries. It’s a good sign. Your spokesperson should be available and answerable. You could create a dossier of Frequently Asked Questions (FAQs) and the not so frequently asked questions for the people interacting with the VCs. Remember, it’s a two way relationship. You must share information, maintaining transparency, but with dignity. Think about the VC’s predicament - he has to trust you enough to put his money in your business. Give the VC time to revert - do not rush through like there is no tomorrow - but do not procrastinate either.
Internal solidarity. Your business partners, if any, should have had a brainstorming session, followed by internal discussions and agreement amongst themselves as to the business viability and operations, before you open yourselves to VC Funding. There should be no internal discord while interacting with the VC since that shows up as a chink in the armor, and negates your credibility considerably.
Be transparent. For proposing the business and later for establishing it, you need to go through proper channels - do not cut corners. Give honest references - do not try to hide any past problems and/or non starters. Pay your taxes - fraudulent behavior can be a dampener for the relationship you want to start or already share with the VC.
Agreement. Ensure that you have in place, a detailed agreement draft open for any clarifications. It establishes the seriousness of your intent. The agreement should not have afterthoughts - it only delays everything and results in loss of interest. Help the VC understand your business; that way he will be able to make a decision in your favor. Don't get too technical since the VC may not be a techie - he is probably just a man with money who is looking for good ROI. In fact, there is a chance he may be better at financials than you are!
Don't drop names. Another very common mistake budding entrepreneurs make is that they often throw names around. Avoid doing this. The VC is a well off, well-placed individual who knows the right people, which is why he is where he is today. He does not need any name-dropping from you.
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—About our writer:
Dolly Saxena’s strength lies in her communication skills. Whether it is Brand Communications, Corporate Communications, Employee Communications, Stakeholder Communications, Public Relations or Image Building initiatives, Dolly is well up to the task. She has over 16 years of experience in various roles and has advised a variety of clients. She has also crafted communication strategies and trained people in communication skills. Product launch action plans, employee information cascades, pre IPO campaign, CSR initiatives, business communication strategies, internal and external newsletters, and creation of training modules are some of the assignments to her credit.
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