What Gets You VC Funded
The father of venture capital, Georges Doriot, said, “Without action, the world would still be an idea.”
He also said, “Always invest in a Grade-A man with a Grade-B idea. Never invest in a Grade-B man with a Grade-A idea.”
As one of the first American venture capitalists, Doriot believed in building men and in building companies.
While the world is admittedly a different place than it was in the mid-20th century, the same principles of venture capital apply today.
Startups still need money to grow, and investors still want to invest. In this article, we look at what gets you VC funded so you can build your dream.
College Doesn’t Seem to Matter
Surprisingly, a college degree doesn’t ensure an investment. While Stanford has always been known as a startup incubator, many more founders of companies don’t have any of the following: an Ivy League degree or a college degree.
Famous entrepreneurs like Steve Jobs, Mark Zuckerberg and Bill Gates all dropped out of college. It seems more startup founders drop out of school rather than graduate from top universities.
There is one caveat, though. While Internet companies have the highest number of college dropout founders, there are virtually no dropouts among founders of pharma and biotech startups, and most have advanced degrees.
A Working Business Counts
It’s not worth your time to seek out venture capital if you aren’t already up and running.
You want to at least be beta testing your products and services before you approach a venture capitalist.
It also pays to have experience under your belt and a list of connections in hand.
Lay the Groundwork
A future-forward idea before your presentation would be a very short video or one-page summary. You can send this by email right before your meeting.
This is a great way to get the preliminary information out there.
If investors are drawn in by your video, then you can make your pitch. The steps are as follows:
- Make contact
- Send attention-grabbing video
- Schedule meeting
- Make pitch
- After meeting, send thank you
It’s your overall story that matters. You begin it in the video and finish it in the meeting, where you present your business plan.
The Business Plan is a Must
You absolutely must have a thorough, meticulously laid out business plan before getting VC funded or even approaching an investor.
In addition to the business plan, you want to begin with an elevator pitch, instant summary and branded tag line.
Before the investors dive into your business plan, you want to give them a reason to do so.
It’s important that you can describe your business in just a couple of sentences. Personalize your pitch, but keep it succinct so you can encourage reading of the whole business plan.
If you’re wondering about the time and effort it takes to put together a business plan, rest assured that investors will pay attention to it.
The real truth is investors will reject your business without ever reading your business plan if you don’t intrigue them. But, they will never invest in your business without first reading the plan.
You can count on venture capitalists to read your business plan line by line if they are interested.
Now that we’ve looked at what gets you VC funded, let’s focus on a few more key take-aways.
Remember that every investor has his own idea of what’s valuable and worth investing in.
Not all investors believe the same things are important. Before you meet with potential investors, do your research. Know what’s significant to them before the meeting.
That being said, there are a few things most investors agree are important when granting funding:
- A seasoned, experienced and older entrepreneur
- An emphasis on the customer. In other words, do you know your target market and why they’d want your product.
- The team, including the entrepreneur. Is the team passionate, skilled, experienced, coachable and committed?
- Is there a real opportunity for your product or service? What’s the big idea?
- Do you have a profitable, workable business model?
Concentrate on the items mentioned in this article to improve your changes at getting VC funded.
Are you a new startup ready to succeed? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your HR duties, finances, payroll and more to us. Contact Escalon today to get started.
Image: Tim Bognadov