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VENTURE CAPITAL
There are Five major reasons projects do not get funded when presented to a potential investor:
1. Presentation. An unprofessional proposal submitted to an investor will
not be read by a prospective investor. A start-up or weak company that has a
strong, professionally prepared Business Plan has the same chance as a million
dollar business.
2. Management.
Lack of seasoned management will hinder a great idea. It is imperative to strengthen the team prior to submitting the finance package.
3.
Strategy. Poor or unrealistic business strategy, unreasonable market
penetration and timing, and unsubstantiated projections will keep an investor away
from the project.
4. Economics. Lack of compelling economics and market size will determine the
interest of an investor. This is based on the state of the economy and your
financial projections.
5. Negotiations. It is in your best interest to work with an investor that expresses
an interest in your project. If one person is willing to invest, this alone does not
mean there are others.
Fact or Fiction?
1. Control of Your
Company. Not true. Venture Capital firms/Investors do not
want to control a small business. The equity position requested is dependent upon
the valuation of the company.
2. Basic Information Required. Not true.
Only basic information is needed to
determine if the investor wants to see the Business Plan. A well organized proposal should interest the investor in "seeing more".
3. New Technology Only.
Not true. Leading edge technology can be very
expensive in terms of development and marketing which makes them difficult to
finance. Venture capitalists are interested in the potential for high growth and can
be specific to several industries.
4. Satisfied with Reasonable
Returns. Not true. When making a high risk
investment, a high rate of return is expected. This will be in the form of interest or
equity participation.
5. Quick to Invest. Not true. Most businesses are in the 11th hour crisis by the
time they are seeking funding. The time span from the moment the proposal is
received, reviewed, approved and funds distributed can be lengthy. It will take from
6 to 8 weeks for a positive response, assuming your proposal, projections,
marketing strategy and management team are strong. It is imperative that a
well-prepared business proposal be produced in order to have a chance at raising
money in that time frame.
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