If you are planning to establish your own startup, one of the first things that you have to do is to secure financial support. One way to do it is to apply for a bank loan. Another – and the more popular one – is to seek support from venture capitalists.
Because of the competition, getting an approval from a VCs is not that easy. However, with the amount of available funds out there, it’s never impossible to get one – if you know what to do.
Everyone agrees that in the process of getting financial support from VCs, the most important moment is the time when you make your pitch to your potential investors. And while you have to pay a lot of attention to this particular occasion, you must also keep in mind that most of your time will not be spent on the actual pitching – it will be on the preparation.
Like baseball pitchers, entrepreneurs who want to secure investments should spend more time preparing for the pitch than the actual pitch itself. Following is a step-by-step preparation process that aims to assist entrepreneurs who seek funding from venture capitalists:
Step 1: Look for Specific Partners
Instead of just looking for investment firms, entrepreneurs should focus their time identifying specific venture partners. Despite working at the same investment firm, partners usually differ in terms of operations, capabilities, and expertise. Some investors, for instance, prefer startups focusing on electronics or health-related services, among others. Knowing this will save you a lot of time.
One way to help you in your research is to speak with other entrepreneurs who recently closed investment rounds. They can give you information regarding not just the firms but also the specific venture partners.
Step 2: Get to Know Your Potential Investors
After identifying a number of potential investors, learn how they operate. It is not advisable to immediately approach them and ask for funds – it’s a one way ticket to rejection. What you must first do is to get to know them and, if possible, get them to know you.
You can connect with them through social media accounts. Follow them on Twitter and check their Facebook presence. You can get their attention by providing insightful and interesting comments on some of their posts. Keep in mind, however, that you have to do this moderately. Otherwise, you’ll be tagged a stalker with a vested interest.
Step 3: Secure Meaningful Referrals
Establishing a social media network with your potential investor is not enough to get their approval. More than that, you should get their attention by securing referrals from people they trust.
Recommendations from accountants and lawyer, while not entirely worthless, would not usually secure an investment. What you must have is a referral from an entrepreneur who is already on the portfolio of your potential venture capitalist. Getting one is difficult, but it might spell the difference between an approval and a rejection.
Step 4: Preview Your Venture First
Like what was previously stated, immediately asking for money is not a very effective move. Thus, when you get the opportunity, schedule a meeting with your potential investors and tell them that you want to preview your venture and get their insights. This will pique their interest and will assure positive reception to future meetings.
Step 5: Provide Updates and Follow-ups
Following the preview meeting, do not forget to send your potential investors with updates and follow-ups. Giving them information about the improving status of your startup will act as a signal that will entice them to forge a partnership with you.
Step 6: Initiate Fundraising
Finally, when you have finished the first five steps, coordinate with your potential venture capitalists and ask them for possible investments. This step should not be very difficult especially with all the information and recommendations that you have previously gathered.
Following the six steps would take a lot of time. But it will assure you that when you return to running your business, you have secured that elusive investment that you really need.
by www.funded.com Mark Favre