Venture capitalists reach out to businesses that have a high potential for a return on investment. This is usually the case for a business that has determined what area of the market it will focus on and simply needs funds in order to scale. There are four stages of the fundraising process. Series A and B are when venture capitalists make the most investments, but they also make investments in Series C and D.
To secure venture capital to grow your business, you will need to reach out to one of the less than 200 venture capital funds around the world. Fortunately, there are aggregators for venture capitalists that will make it easier to find one that may be interested in investing in your business.
Build A Successful Business
In order to secure funding from a venture capitalist, you must already have a business. This is not a source of funds for those who are trying to turn an idea into a business. Therefore, any information that businesses are able to provide about their revenue and growth will make your business more attractive to investors. You will need to submit a business plan that allows for the venture capitalist to determine if your business fits the fund’s criteria.
Build A Relationship
Communicating regularly with and building a relationship with a venture capitalist is a great way to increase the chances that you secure funding. Fortunately, there are events that allow for business owners to meet with venture capitalists. Fortunately, your product can serve as a great ice breaker.
Be Careful When Selecting A Venture Capitalist
While you may desperately need to secure funding, be careful with the venture capitalists who you eventually select. They will likely hold one or two seats on your board of directors and will have a strong influence on how your business is run. However, this can also be beneficial because venture capitalists will provide you with assistance on areas where you have less experience. However, to be helped and to build trust, it is essential that you are honest and transparent.
The venture capitalist must perform due diligence by examining your team, products, services, structure, market operating history and governance documents. If the venture capitalist is satisfied, an investment is made in exchange for a share of the equity of the company or for debt.
Daniel Palmier is a leading Boston CEO, Real Estate Investment Manager, and Founder of UC Funds.