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.
Dear Megh Shetty
Thanks for asking advice about going to a Venture Capitalist, this is one of the major for almost all start ups who have financial crunches to implement their innovative ideas.
I do agree with what all the experienced have commented and in their own words have also informed you one major factor - the investor / VC is least bothered about the in detail technical aspects of your project and more concerned about their financial strength not being mis-utilized so while you go to a VC for help
1 make a detailed project analysis majorly stressing of the financial aspects the needs and the returns for ROI plays a major role to attract VC's
2 be clear with the roles of people involved in the project for some VC's would prefer to walk along your path
3 as for presentation of information be brief
hope my views are not contradictory to the norms prevalent and help you in your quest
VCs don't sign NDAs. Submit the prospectus. Be sure the exit strategy is clear and attractive for any investor
Get an NDA signed if you want to protect your idea.
Have a business plan with a great team as part of the plan. It is the people that they are investing in.
Most VC's will discount the numbers from 25-75% depending on who you speak with.
You can start with an executive summary that highlights what you have-who you are-what IP you have-how much you are looking for them to invest and what they can expect in return. This is one or two pages.
You need to approach the VC's that invest in your product and the stage you are in.
Also they want to know how much you have invested and who else invested to get you to this point in time.
If you get up in front of a group of potential investors make sure you present a cogent well oiled presentation that is not too technical but says what you are doing, what your marketplace is, who you are, and how much you plan to return to them.
In no case read the slides and if there is no Q and A get a professional to give your presentation.
1. If you fear copycats, ask the audience to sign an NDA. However, you can always protect you by filing a provisional patent application. Know that this application only gives you the precedence in filing the patent (i.e. that somebody else files a similar discovery).
2. Traction! Show them paying customers and that they grow in number. This is the only metric that (always) matters to VC.
3. Be as factual as possible. Leave the emotions and opinions aside. Be always relevant and understand that VC are not interested in technical details (i.e. how you do things), but mostly on what you do for your customer, how many they are and how much they will pay you. Be as succinct as possible, and provide the essential information VC are looking for. Simplicity pays off!
In any case, best luck! :-)
Check out your investors, make sure they are legit. We can help you with that. Best of luck
Megh see below:
1. You need to have a non disclosure statement (NDA). WHile this won't completely stop plagiarizing you have a huge advantage if it happens.
In addition, you need to do the following steps:
a. make sure your financials are solid
b. understand all your ratios
c. identify what is your product or business - be able to sum it up in 20 seconds
d. Nail down 15 points or less of why you are a good investment
e. Take all the emotion out of the pitch - be passionate but not emotional
2. WHy is the business viable? Financials? How did you value the business and why? What are you expecting for a return on their investment? What help do you need? WHy are they a good fit for your business?
3. There are many forms.
Megh, this is what I do for a living. I help businesses prepare for VC meetings and approach VC firms. Above are some simple steps. If you want some more detail feel free to contact me.
Any proposal requires a business plan. You should qualify the document with a confidentuality statement. Any investor/VC wants to know how you are going to generate a profit and how much so that they can see how they are going to get a return on their investment, and eventually their money back. The most important information for any investor is what is faster, better, or cheaper about your solution as compared to similar products and services, and how are you going to successfully market it? In return for their investment they are going to want a certain amount of equity in your business and you need to be prepared to negotiate that percentage in advance of the discussion on equity valuation. See "Shark Tank" on TV for a good preparatory lesson.
Put you idea you should be smart tricky in your idea. Attractive income return for investor.
First, NEVER present your idea to anyone without first establishing some form of written documentation about your meeting. This can be (but doesn't have to be) an Non-Disclosure Agreement (NDA). Many investors won't sign NDA's but that doesn't mean you should not have some type of written agreement that says, on such & such date, you made a presentation to them.
Second, make sure that whomever you're presenting to is interested in and will invest in your space. Most investors and VC's specialize -- so it is a waste of time pitching someone who doesn't ever invest in your type of business.
Third, be prepared. 99% of entrepreneurs are not prepared for that very rare and special opportunity to make a presentation. Believe me, you will only be given one chance to make a good first impression. If you blow it, the word will be spread to other investors and you'll soon be labeled a pariah. How do you prepare? Pay to have someone rate your value proposition against a norm. Then pay to get someone to help you fix what the rating agency has identified. If you do just this little bit, your chances of getting funded will increase 1,000 fold.
1- understand what and how much they fund
2 - do not beat about the bush be specific
3 - tell them what they are going to get
4 - exit strategy
5 - what is your role
6 why is investment in you a good idea