After a big boom and bust, venture capital funding is on the rise again. But today's VC investors want more solid information from the companies they choose to invest in than in the frenzied days of the Internet bubble. And remember that VC firms typically look to cash out in three to five years, particularly by seeing your company acquired or going public. Follow these guidelines to increase your chances of securing a venture capital deal:
- Create a high-level, comprehensive business plan.
- Find a venture capital firm that fits your company.
- Post your venture capital funding request online.
Create a business planThe more thorough and complete your business plan is, the better your chance of securing venture capital funding. VC's will be looking to see that you have a unique product in a growing market and that you can forecast high profit margins and high growth in sales.
Find the right management team to run your businessYou may have the greatest business idea in the history of the world, but that doesn't mean you know how to run a company. Venture capital investors want to know that the company they're investing in has the right people in charge. Recruiting qualified, experienced executives demonstrates that your business is set to succeed.
Find the right VC firmVenture capital firms tend to limit their investments to a few industries. Find a firm that will fit with your company's financial needs, growth strategies and culture.
Let a VC firm find you onlineThe best way to get something is to ask for it. Posting your funding request online is a quick way to let investors find you. If you have a great idea with the right resources and a business plan to back it up, venture capital investors will be fighting to finance you.
- VCs typically take preferred stock in your company and seats on your board. If you're not willing to give up some ownership or control, look elsewhere for investment.
- If your business has been around awhile, get a private equity rating service to rate your business' value and what will be gained (or lost) from accepting venture capital funding.
- Landing a venture capital deal could take as long as six to nine months.