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.
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.
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.
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.
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.
I suggest you contact my colleague, Kate Ingham at Alchemy equities. Kate specialises in capital-raising for female entrepreneurs.
You can reach Kate at +61 2 8088 6224 or +61 414 321641.
Theuri, all of the below advice is dead on...... especially proving your product or service is a viable one, let alone one that can be invested in (as they are fewer)...and note, many VC's and angels expect you having skin in the game - having spent money on it as well...therefore put your focus on validating the product or service, which you can do with little to no money, get involved now with various business and VC groups in your area, build relationships as you go, and then when you are prepared to pitch you will be one step ahead.
But first, if all you have right now is an idea in your head....get it down on paper and a plan - without that you won't get people to listen and you don't want to take anyone's time to early in the game as it could impact you when you are ready to go (though it doesn't have to 100% ready, but it has to be more than 0%).
If it is possible to have a dummy/protoype or test somewhere, this would help tremendously. Almost no VC would give a lot of money to a first-time (?) entrepreneur with an idea, unfortunately. The better you can explain what problem you're solving for whom and why your potential clients would pay for it, the more doors will open for you.
There is so much you don't tell me here? Do you have an existing business or is this a new venture? If you don't have an existing business and this is a "start up" then how much have you already invested in getting this idea of yours off the ground?
Irrespective, a well written business plan is the first step and if this is a start up and depending on how much you require, then I'd stay away form Venture Capital and go for a business angel. You can then get your idea to pay dirt and exit your angel with the VC or external funding later down the road. Thats the quick version reply but this is a very big question and I'm not sure I have anything like all of the facts,,,,
Who is your customer? how bad does he need your service or product? how much benefit does your customer get from your product ? how many customers have you spoken to about your service or product ?
This is what i ask of any person looking for funds and then i ask more .being in business is Passion and you need to have that too when speaking to any investor platform.
Very simply put, you have to appeal to their sense of greed while minimizing fears about risk.
You must demonstrate a clear understanding of all the factors involved in your business model, the market opportunity in front of you, and exactly how and when you'll be able to generate a return on their investment in terms of revenue and/or valuation growth. A well constructed and supported financial model will assist with this, but ultimately you must be able to communicate it concisely and effectively yourself. They need to believe in your ability to execute as the business leader, just as much as they need to believe in the product or service that you'll be selling.
This is the most difficult phase of a start up
Having a product ready to market is definitely a plus having your product patented is a requirement before you request VCs to start to take you seriously
Preparing a brief business plan summary with clear indication of use of proceeds that will generate sales and ROI will get the attention if every VC I. Your vertical space
Finally you need to know or network with the key VC decision maker / Investment committee to enable a favorable decision
Do try to out think the VC prepare to woo them with an opportunity that will succeed to make them more money
They need to be comfortable with concept and needs not to excessive but with practical application
The next step is to selectively submit to not more than three VZs that play in your space do not Blast email every one with a time line of 30 business to accept or reject your proposal for investment
Be prepared to negotiate the counter offer because we always do not get what we want
Most times owning 25% of a $100million company that is growing is better than owning 100% of zero
(5/06/2013 Update - Great article,Theuri: http://recode.net/2014/05/05/why-wont-anyone-give-me-money/.)
You'd be negotiating from extreme weakness, Theuri. Even if you could attract funding, you'd end up owning so little of the business that it probably wouldn't be worth doing from your standpoint. Among other things, as Bernadette Boas already noted, investors expect you to have skin in the game. That skin can be cash, 'sweat equity', or, more commonly, a combination of both. But they want to see that you believe enough in your own idea that you have made some sacrifices on your own before you ask them to do the same thing.
Outside capital-providers invest at different stages. There are early-early investors--'angel investors,' they're called. Others wait until a business is well down the road before they pony up. They know it costs more for them to do it that way, but they also know that their risk is much lower.
At a minimum, you're going to need a P.O.C. You can't do ANYTHING without that. You're also going to need a business plan that describes the business in all its aspects (soup-to-nuts), along with the processes, key people (and their backgrounds), the target market (and its demographics), and why your solution solves a 'burning need' in the marketplace in a way that no one else does. . .or can. 'Can' is especially important because it's crucial that you design ways to prevent imitation or substitution on the part of would-be competitors.
Long story short: You're looking for $ too-too early. First things first. Luke Havard's advice is sound: "Make sure you do as much research about your business model as possible and ensure you get all your number right first." But that's only part of it. Investors invest in people, and you have to get the people side right, too. Don't expect any big salary, either.
Henry Val is also on-point: "Is there a business plan available or executive summary?" All of us could do more to help you if you were more forthcoming in what you're talking about. If you need an NDA before you do that--and I think you do--then feel free to contact me--cfa2005(at)gmail(dot)com--and I'll send you an NDA. Once that's in place, we can talk, and you'll be protected. (I'm a CPA who also holds the Chartered Financial Analyst designation.)
There will be no charge until/unless you agree to it ahead of time. We don't do business that way. Hope to hear from you.
I'm inclined to go with a combination of Luke Havard and Ellen Harris have said. Perhaps the best way to get started (and to fine-tune your executive summary of your project) is to sketch it out for our group on Mosaic Hub and invite criticism, correction and capital -- all at the same time. In a best case scenario, you'll find some interested investors [they needn't be venture capitalists, per se]; a realistic case scenario, you'll get some comments regarding your presentation of your idea which will help you improve upon it in order to attract the needed capital. I would be very interested in seeing your basic plan in summary form.
You should try crowd funding - if you're not after mega millions and don't mind spreading the wealth, it's a cool option and actually, happens fast, if your idea get traction. Go to places like Kickstarter or google for options and see which one is the best fit. Good luck to you, Theuri!
Theuri: there is lots of good feedback contained in the responses below. Understand that a VC will generally churn through 1200 proposals in a year. Of those 500 will get face-to-face meetings, 10% of those will get into a due diligence phase, and of those, 10 will make the cut and get funding.
If it is capital intensive you may be able to secure funding via Hire Purchase or and Asset Based Lender (ABL). An ABL can advance against plant & equipment so long as there is also a debtor book to fund against. Venture Capital will depend on strength of business case, the management team credentials and likely speed of growth and therefore return to the funder.
Two things rise above all others. First, you must network your way into personal introductions to potential investors. Second, you need a concise pitch that creates urgency among investors to meet personally with you.
Failing to do either is a show-stopper.
Focus on networking and finding the right VC firm. You can also apply to accelerators in your area. They are very competitive however if you have what they are looking for, its a great way to gain visibility.
Tell me a little bit about your idea. I have access to funders that have no limits on the amount.
Have you thought of Crowdfund. I have a website for you to check out.