Venture Capital

Venture Capital Do’s and Don’ts

DO:

  • Base your projections & revenue model on realistic (tested) assumptions.
  • Be concise, but include all of the relevant information (spend more time completing your application properly, rather than leaving out key sections).
  • Be positive about your company and the product/service, investors look for people who believe in their ventures.
  • Spend time perfecting your micro/elevator pitch so you can clearly explain the opportunity.
  • Be able to describe and show how your product/service is differentiated and better that the current solutions available.
  • Have patience and perseverance. Raising capital and building a start-up is a marathon, not a sprint.
  • Know what you are looking for in a deal and have this clear in your mind before you begin raising funding.
  • Ask an experienced business person or professional to read your and comment on your business plan. Is it clear and does it sound reasonable?
  • Be realistic about both the weaknesses and threats to your business and not just its strengths the opportunities available.
  • Have someone else proof read the document before submitting it to make sure there are no spelling, grammar or calculating errors.
  • Ensure that you have a strong management team who could run and develop the business.
  • Read through the investment criteria/mandate of any potential funder carefully and ensure that what your business is offering is aligned with what they are looking for.
  • Spend time thoroughly researching and understanding your competitors. This is vital.
  • Remember that the relationship with your funder will be for years, so be sure you can work with them.
  • Network, network, network. Meet as many potential funders before you need to raise funding as most deals are sourced and concluded through networks and referrals.
DON’T
>
  • Make up answers to questions or avoid answering questions. Rather say you don’t know, do your homework and respond.
  • Just focus on the technology, ignoring all other aspects of your business e.g. competitors, the market, revenue models etc.
  • Use jargon, repetition, have spelling mistakes, or submit incomplete information.
  • Make wild, unfounded and unrealistic assumptions and predictions e.g. “…hockey stick growth”, “… capture 5% of a billion dollar market” or “…the strategy is to go viral”.
  • Say that you have no competitors. People will think that you are either wildly naive and know nothing about the market, or that the market is not ready for your product/solution.
  • Apply for funding when you have two weeks left of cash in the bank. Venture capitalists do not make snap investment decisions.
  • Apply to every venture capital and private equity company on the SAVCA list with the same generic business plan. Apply to the right funder, with the right information, at the right stage.
  • Take rejection personally. You could have a great business but it might not be in line with a funder’s mandate. On average only 1 investment is made, for every 100 to 150 proposals received.