How do I attract venture capitalists or funding?
I have a business idea that I would like to explore. My only draw back is that its a little capital intensive. Therefore the need to find a venture capitalist or some funding.
Kindly assist me in going about this.
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Apr 28, 2014
I agree with both the comments by Luke and Seth. They make very important points. There is an excellent book by Dr. Sean Wise "Hot or Not" that gives you a checklist to go through before you look for Venture Capital. Here is a link to Amazon for the book.
http://www.amazon.ca/Hot-Not-Know-Your-Business/dp/1468024493
Unless you have an amazing idea with a very well executed business plan, it is unlikely that a Venture Capitalist will invest in a startup.
They are looking for "proof of concept" which is how many of your products have you pre-sold or sold and how much "skin' do you have in the game, ie how much have you invested in your idea. If you have no investment, why would a Venture Capitalist invest? Don't forget a Venture Capitalist is in it to make money fast and get out.
Apr 28, 2014
You have to figure out some sort of plan of action. Knowing that it is capital intensive is the first step.
1. What is your value proposition?
2. What is your customer segmentation?
3. Are you offering a product or service?
Get down the who, what, where, when, why first and then figure out the how?
Maybe you don't want a VC in the first year of operation. Maybe bootstrapping is a better method. Check out HP way.
I would start working and doing tons of due dilligence.
Therefore, you are so prepared and so confident when you talk to an investor and a VC that there is no question that they will WANT to give you money for your idea.
You want to be so confident in your business that you ask for 1M and they offer to give you 2M and you have to negotiate them down and show them why you only need x amount of money.
There are a lot of great books to read that discuss the idea of funding and VC.
One piece of warning, be really careful talking to investors unless you have your business model fully fleshed out.
Check out BUSINESS MODEL CANVAS. It's all over the place and a book called Business Model Generation.
Think about companies that have to plan for 5-30 year FDA processes and approval.
Knowing that you need a lot of money is the first step in an infinite process of business model innovation and iteration.
Good luck!
Apr 28, 2014
In anything that you do focus on explaining as simply and concisely as possible exactly what your business is and the immense value that an investor will get by investing in the business.
At the end of the day the only reason anyone will invest is if they can see immediate value and profit from your business. If an investor cannot understand what your business is or how they can get profit quickly by investing, they will NOT invest.
Before you even attempt to reach out to investors, make sure you do as much research about your business model as possible and ensure you get all your numbers right first.
This is 'the' recommended place to start for what is described. Well said, Luke. Thank you.