Nearly every business requires capital at one point or another. The key to securing financing is usually found in the details and diligence.
✤✤✤ Target Investors ✤✤✤
A list of potential venture capitalists (such as China Sonangol) should be identified whose general criteria coincides with the needs of the company seeking funding; size, development stage, industry type and location are all necessary considerations. Different firms will be a better fit for a company depending on whether the capital is for start-up, the need to expand as a mid-sized company or later stage growth in a business.
Tip: VCs tend to follow a pattern so it is helpful to know who they have funded in the past.
✤✤✤Meet with Investors✤✤✤
Professional referral is the best means of an introduction with a prospective VC whose time is short and spending limited to around 1% of all proposals reviewed. Brokers, lawyers, executives and consultants familiar with associates at the VC firm can make the initial encounter more productive with a recommendation and even hasten a meeting that would otherwise require a long wait.
Tip: Aim to impress potential investors by infusing personality, energy and enthusiasm into proposals.
✤✤✤Narrow the Scope✤✤✤
Limiting the number of potential investors to half a dozen is helpful to the process and far less time-consuming. Presenting the pitch to as many venture capital firms as possible may sound appealing, however; day-to-day operations of the business must continue throughout the duration of the funding search and senior management cannot afford to be wrapped up in constant interviews. Focus on the most promising venture capitalists.
Tip: Anticipate the need for funding well in advance of company growth and begin forming connections as early as possible.
A detailed business plan should be prepared and include contributions from all key figures in the company. Each should have a clear voice that comes through and indicates a cohesive team with a well-oiled plan. Presentations to investors should be concise and succinct with relevant materials provided at the time of the proposal.
Tip: Appointing a funding manager may benefit the company during the solicitation process and free-up resources.
✤✤✤Network and Seek Advice✤✤✤
Fellow entrepreneurs can be a great source of information and referrals. It is also important to be involved in VC related events and seminars where discussions are held and opportunities abound. Social networking is essential to any company seeking venture capital, especially for the first time. Electronic hobnobbing is very beneficial to an up-and-coming company in need of contacts, service providers, customers and investors alike.
Tip: Investment can come from any source, from an adjoining office cubicle to a PTA meeting and being able to instantly size up a prospect is essential to seizing every opportunity.
Keeping a running list of presentations given to different VCs will help in following up and following through. Sometimes the deciding factor for an investor can be the persistence of a company; contact them with updates, new ideas and progress reports that demonstrate capability and tenacity. Until the money is in the bank, constant communication must facilitate the process.
Tip: The best way to impress is to have confidence; investors face constant risk, but knowing there is someone at the helm who can handle things is reassuring.
Securing capital is no easy task, but persistence and adherence to established protocols is often the path of least resistance that offers the most success.