Going to Venture capitalists- can you give me some advice plz?
A couple of questions:
1)What steps should I take before i take my idea to the VC's / external investors so that the idea doesn't get lifted/ plagiarized/ copied?
2) What information do the VC's or external investors want to see in the proposal?
3) How should this information be presented in a document?
all advice-thanks in advance,
I think you have had just about all the answers you need here if I can summarise.
A solid business plan and cash flow projection. Happy to provide further info if you want contact me via LinkedIn - Just so you know I am not a venture capitalist.
You need to hire expert advisors in this, been down VC / PE roads many times, unless you have already been there. If you need help, please let me know. Dave Cochran, Cochran Edwards Capital Partners, Seattle
Based on my experience, the investors care the most about the "Exit Strategy" because they will make money only when you will be able to sell your business. They are not interested in the dividends. They do not want to draw salary for themselves. They just want to multiply their investment by 5 or more. That is only possible when someone acquires your business.
Only go to those VCs that invest in the sector/industry to which your business belongs. The VCs who do not understand a particular sector/industry usually do not invest in it.
and lastly Good luck!
1. You should have them sign a Non-disclosure agreement particularly if its related to a Invention or Copyright for special business methods or Trade Secrets. Do not ever expose in details always leave out specifically targeted areas and say a more detailed format will be sent on request and send all correspondence Certified Mail and return reciept.
2.They want to know who are the principal operatives of the Business, Banking information of Major operatives or Business normally over a 5 year period or Tax Statements,
3. You will have to right the proposal normally to their Guidelines and specific to the date they take proposals, its will have to detail your mission or request for funds on what you are to do and the Return on Investment of these funds.
1)Speak to an attorney and get an NDA or similar agreement. Some VCs won't sign one, but asking is better than nothing, and if they refuse - I'd take that as a sign.
2) Contact your local SCORE chapter or SBA. They have business coaches available who can help prepare these documents. If you have the budget, you can also hire a consultant. Basically, they want to see some projections, a strong business plan, and a strong idea.
3)Generally have a 1 page handout "cheat sheet", and a bound presentation. Also, having a presentation (ppt) on hand in digital format with notes is always helpful.
Many VCs will give feedback on what they need to see, and a lot of it is trial and error. Main thing is to prepare well, go to one, and hone your presentation based on feedback. Repeat cycle. Good luck.
1) Reputable VC's do not 'Lift ideas'.... this should not be an issue. However, if your idea holds no barriers, then you should patent your processes and gain IP on your material before going to early stage.
If you are at the Seed stage of your adventure, (and it sounds to me that this is where you are), then VC's are out of your league. You should therefore look to the 3 F's for development funds.
Once you have developed your business model, (early - stage startup up to £500,000), you can now raise equity to help your model to service it's sales. Go to work here... leverage equity with debt; look for Grants and awards, really become obsessed with finding capital, as this is now make or break for you. However, you are still outside of VC territory.
Once you have proved your market (and your ability to stay in it), you are ready to go for growth, ie a marketing driven trajectory. Now VC's become interested in you..............................
Here there are any number of equity investors and alternatives, and so you will need to retain an expert to provide consultancy to prepare your strategic business plan and match you with an appropriate investment medium.
2) Your proposal is in effect a strategic business plan. This document should be compiled by professionals (I always take my clients to the big boys to leverage credibility ....PWC; Ernst & Young; Deloitte etc). You need to show:
• High return: an IRR of 33% is a minimum starting point.
• Stage: already generating some kind of sales.
• Realistic financial forecasts.
• High growth potential: the business must be scalable.
• Intellectual property: IP needs to be secured within the company.
• Market knowledge.
• Investment ready: again use the professionals here!!!
• Exit route: Normally 3 to 5 years.
On average, business plans presented to investors make the following stats:
• 25% are rejected after a 3 hour appraisal
• 10% are rejected after a full day evaluation
• 3% are rejected following failed negotiations
• 2% succeed in raising funds their investment with government debt.
3) See 2 Above
Going to meet Vanture Capitalits should as much be treated as a business negotiation of sorts. Kindly peruse these articles. Hope they help.
1. GBSH Insights: Are You Investment Ready? http://buff.ly/1mQjUIk
2. GBSH Insights: How to Raise Private Equity and Venture Capital http://buff.ly/1mQk5mN
1. Agree with other posters--forget the NDA; most investors won't sign one and it can be a deal killer to even ask. Instead, research your investors (thefunded.com) and/or work through trusted referrals and established angel groups in your local area. Take advantage of free resources such as local entrepreneur educational groups, mentors, etc. before you even go to investors. If you can, hire/retain/seek someone with experience on the path ahead of you.
2. Make a 1-page summary. Simplest is to set up an account for you and your company on gust.com, which will ensure you cover all the key info and it fits on a single page. You should have depth behind that 1-pager, however, so you should have already done the work of talking to customers, building a business plan, constructing detailed financial projections, etc.
3. Build your gust.com profile, have a 1-page summary and a crisp, clean and very well-rehearsed 10-slide pitch deck that you can deliver in 5, 10, and 20 minute versions.
Contact me if you want more details. Good luck.
Short answer and very important:
Write a concrete and solid business plan and be able to present it and yourself well.