Today I’ll continue with my series on the Entrepreneur’s Guide To Venture Capital.
14 Things VCs Look For
6) Synergies With Other Portfolio Companies
When you’re doing your VC research, take a look at what other companies they have already invested in. Is there a way you can help those companies grow? Are there synergies that you can see for a mutually beneficial relationship?
The venture capitalists have already invested money into their portfolios and want to see them succeed so if you think there is a potential fit to share resources, partnerships, customers, media, etc. bring it up!
7) Valuation
Venture capitalists typically like to take sizable positions in your company. Don’t expect to get rosy valuations from them – especially if you’re still in startup mode. Sure you could be worth a lot some day… but right now you’re not and you’re only able to sell future potential so much. Expect to give up between 30-60% of your business in most cases. Unless you are already well established and don’t need much money (in which case you probably aren’t talking to venture capital firms), you will be giving up a significant portion of your company at a valuation far less than you think you’re worth.
Remember the idea behind sourcing capital is that you’re owning less but of a much bigger pie than if you try to do it all yourself. 10% of something is worth much more than 100% of nothing.
Honesty, Passion, Good Story
These are some of the soft factors that venture capitalists look for. At the end of the day the decision to invest or not is made by people are people are governed by their emotions. Venture capitalists want to see that you are honest and they feel like they will be able to work with you in a trusting relationship. If they don’t think they can trust you, forget about receiving funding no matter how great an idea you have.
They also want to see that you are passionate about the business. You’re not in it just for the kicks of running a business – you truly love what you do and will give anything to succeed. VCs know that you will come across multiple challenges as you build your company and if you don’t have the passion to move forward then they’ll worry that you’ll give up too soon. Express deep passion and excitement with what you do at every step of the way.
Finally, you want to show that you have a good story to tell. How did you come up with the idea? How did you get your first customer or your first partner? How was the product / service developed? If there is something unique about your story it will help you stand out and get remembered.
