One of the biggest concerns for people planning to start a business is how they are going to finance their business. Of course, a great business plan would not work without the funds to execute the idea. Some people borrow money from wealthy friends, some use the crowdfunding technique, while others borrow from the bank or, better yet, seek equity financing from a venture capital firm.
Most business owners opt for equity financing from a venture capital firm. However, before seeking approval from venture capital investors, you need to make sure you put your well-being first. You must understand that once they invest in the company, they will be co-owners and not mere creditors. Therefore, they need to see long-term revenue with your company.
Here are other tips on how to find venture capital investors:
1. Make sure you present a concrete business plan presentation: Most investors look for companies with big plans they can get behind. He couldn’t expect investors to come in without compelling ideas for his business. Therefore, before looking for VCs, you must first take care of the business plan that you will present to them.
2. Show investors the return on investment they could expect: Most investors look for a three to five times return on investments. You need to make sure that you clearly present to them how much they should expect in return for investing in your company. Investors will be more confident to spend money on your company when they know they are dealing with a businessman who knows exactly what he is doing.
3. You need to let them know you know what they want: Venture capitalists are likely to expect a return on their investments in five to seven years. With this, you should come up with an exit strategy at the beginning of the discussion. You should be ready to explain to them where your business is headed, as most investors are waiting for another investment opportunity. You must be ready to sell, merge or go public with your company to satisfy your investors.
Following the tips mentioned in this article will help you find the venture capitalists you need for your business. However, you must first make sure that this financing option is the most suitable for your business. If you don’t agree to some terms, like having these investors as shareholders, you should look at other options to finance your business.
It is also very important to evaluate your potential investors. You need to make sure that they have a long-term track record of success and that they are trustworthy. It is also very important that they feel comfortable with their personalities and characteristics, since they will be partners in the company. You will be spending many years together, so make sure you have a great working relationship. To be successful in your business, you need not only funds or money, but also peace and harmony between workers and owners.
