Hot Tips for Raising Venture Capital
I attended a really superb event last week for female entrepreneurs who are looking for finance to run their expanding, or in some cases start-up, businesses. Now, I realise that I’m neither a woman, or looking for finance for my business, but I received an invitation from the fabulous host Simone Brummelhuis and decided I couldn’t turn down the opportunity. And I am so pleased I didn’t! Simone organised a great evening, something along the lines of Dragons Den, but more friendly and much more inspirational.
I learned a few things from the speakers and the entrepreneurs about pitching which may well come in handy in the future. But for now I thought I’d write up a few things that stood out the most and which you might find interesting:
- “Only 1% of applicants for venture capital / funding actually get the funding” Emmett Kilduff, cmypitch.com
- When pitching for funding, make sure your presentation delivers “immediate grasp and immediate gasp” Andrea Cockerton, Mudhut. In other words, you need to clearly explain what your proposition is and then how it is possible to extract the commercial value.
- Explain how you can scale up your business. An investor will only back your venture if it they can see that it will clearly cope with strong growth. If your business model requires your every attention in person, it will not be able to support rapid growth and therefore the return will be harder to come by.
- Have a strong team in place with some industry experience. Those companies that performed the best on the evening had real industry expertise in their executive team, which is something to bear in mind.
- When pitching, you can more or less leave out the financial predictions from your presentation. Pretty much all of the panellists agreed the figures are generally pie in the sky and investors are much more likely to invest in a person and a business idea. To make that seem more credible, the panellists included Anna Sofat from Addidi Business Angels, Shaa Wasmund from Smarta.com, Judy Gibbons from Accel Partners, Andrea Cockerton from Mudhut, Julie Meyer from Ariadne Capital and Bill Morrow from Angels Den.
Some food for thought in any case. Now, I’ve just got to create a good idea for how to make my second million (OK, so that’s my first million then). Huge well done to all the panellists who took part in the pitching by the way, some fantastic businesses and business ideas: Outbox, balineum.com, WorldMalls, degreeart.com, moretolifethanshoes.com, Hg2.com.
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Thanks for sharing this info!
SEO and social media are quickly becoming almost essential for new bloggers to gain visibility. These can help in building up the business with huge profits. Thanks for sharing the useful content.
Thanks for sharing. I guess the most important thing to remember to generate capital is to convince the investors that your business is worthy of their investment. This means that you have to ensure that your presentation is persuasive.
I agree that you can leave out financial predictions in pitches. If your presentation relies on financial predictions then your pitch has failed.
Raising capital can be very hard. Thanks for the tips and suggestions ! Hope to see your new updates soon.
1% of applicants succeeding is very low! Interesting to hear that the panelists aren’t interested in financial projections… I agree that they’re often just made-up on the basis of very flimsy projections but on Dragon’s Den the investors are always interested in the financial projections.
Thanks for the advice … good article as normal. Certain marketing rules must still apply - create desire of course - if predictions are required and desire is created then predictions are ok - well as I see it
The tips are really very helpful in any venture one would take. I have been thinking of putting up a business proposal and I got the idea from your article. Thanks.
Firstly, i want to really thanks to share this great information.Good tips for venture capital……..keep it up..
I am about to give my pitching next week.This is a good backbone for me to work on.Thanks
Thanks for the tips! Never thought about leaving out the financial information before. I agree with the tip about getting your point across quickly and at the beginning. No need to build up to the point, just get it out there.
“Only 1% of applicants for venture capital / funding actually get the funding”
Wow, that’s frightening for people just starting out!
great tips , the most difficult part is to ensure the investors that their money is always safe with you ,
Hi everyone, glad you have found the tips useful. I know it seems a little strange to leave out the financials, especially as they are always used in Dragon’s Den, but for me it really depends at what stage your business is at. If you have already been trading and have some solid numbers on which to base your predictions then I don’t see why you shouldn’t include them. If you are at start-up and have yet to make a sale, there is unlikely to be any degree of reality in your numbers. Any investor will pick this up quickly, assuming your pitch gets to the point.
@Singapore Property good luck with your pitch. Do come back and let us know how you got on.
@Stu I know, 1% does seem a little low, but that’s probably as much to do with the sign of the times / current economic outlook. I think we all know it’s a tough economy to be operating in.
@Nicole yes I agree entirely, being persuasive is part of the grasp and gasp point from Mudhut. If you can’t persuade an investor, you might find it difficult to convince people to become customers too.
Great pointers. I don’t think entrepreneurs should get discouraged by the 1%. All you need is one person to say yes, so why not try 100 times? I think smart venture capitalists realize some of the most successful start ups began in down economic times so they are looking to invest in a great idea with great people.
Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction.
Great advice! I’ve been collecting information specifically on how to create a successful venture presentation. It is all in this binder: http://www.livebinders.com/play/play?id=625
Agree with Charles above - persistence is a real virtue in this game!
Speaking with Simone Brummelhuis always you learn something.
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Very interesting and I learnt a few things there, very timely to.
Thanks for sharing them tips.
Rob
The third point is very important and too many peopl forget about that. They talk about the immidiate future or the next 2-3 years instead of focusing on the bigger picture. “In 20 years we’ll be hiring at least 300 emplyees in locations all over the country” sounds better than “in 4 years we will finaly start making some profit”.
Great article. Helped me a lot with my drug rehab business.
Thanks a lot
SEO and social media are quickly becoming almost essential for new bloggers to gain visibility. These can help in building up the business with huge profits. Thanks for sharing the useful content.
Really wonderful piece of information and I appreciate it that you share something so useful with the readers of this blog.
great article. I totally agree with point 4 a business with weak management and employees is already heading in the wrong direction.
Great article, funding is not easy as it seems.
Explain how you can scale up your business. An investor will only back your venture if it they can see that it will clearly cope with strong growth. If your business model requires your every attention in person, it will not be able to support rapid growth and therefore the return will be harder to come by.
I want to raise but not yet. Need some time for some other preparation. Anyway these tips will help me alot.
Wizard I’d largely agree, great ideas are a dime a dozen, great ideas with great plans and structure are much tougher to find.
Nice to see there’s some support for women entrpreneurs, in the UK there are many government schemes and financing to supprot women in and into business.
Great post dear.thanks to give these tips to raising venture capital.i will follow all of them.really great job .keep it up.
The interesting thing that no one really seems to mention about VC is that you also have to be willing to work with them. A lot of them are going to want some say in how you run things…and being business owners a lot of people don’t feel the need to listen to anyone, after all they got the business to where it is on their own!
Yes, it’s very similar to Baffet. He says that:
1) the business have to be simple to understand
2) where do funds appear
3) what is the future development
i have learned a lot from this article totally usefull and im going to share it with my friends this really good.
Great to see! How would people go about promoting their up-and-coming opportunities?
Venture capital seems to be a pretty awesome method of rasing capital - a friend of mine got over $500,000 to start his DVD distribution E-Store from venture capital.
Nice post…..Gives you a insight about the marketing and how to sell products to our customers.I believe this is the trust that we need to build up with our readers and our customers…when it to marketing and sales , there has to be trust and mutual responsibility.
Raising capital is very difficult and you really have to have a solid pitch in order to convince investors to fund you. Thanks for sharing this information.
Thank you so much for the tips…I’ve learned a lot from this article…This is totally useful.
To raise fund I think the best way is to take some load at a time. You can get the money at a time and you are paying them back in installment. So no pressure is felt.
Those tips are great but they’re just a tip of the iceberg. Raising capital is extremely difficult so even if you have the best strategy available you might fail.
Enjoying reading all of your blogs! Especially like the part at the end ….investors are more interested in the person and the business idea…two essential elements!
Thank you for sharing. Not everyone could attend what seems to have been an incredibly beneficial event, so thank you for filling us in!
Interesting statistics. I have a friend who is graduating from MIT this month and he’s having a tough time pitching his start up to VC and Angel investors. The 1% success rate is insanely low. He doesn’t have anyone on his team with industry experience (health equipment) so I’ll let him know.
Getting VC financing is very difficult particularly in the current economic environment. They are looking for the combination of a compelling product/technology and the technical and managerial talent to make it a reality.
Learned a few things about raising the venture capital. It has been a long way to success starting a venture. The event was a hot topic to discussed.
How to find venture capital for a software startup? I want to send my business plan to venture capital firms. Any advice?
Raising capital is really so difficult .How we can find capital for a S/W company ?
I am not well familiar about venture capital .Can you tell me something about venture capital.
Good tips to know, although knowing that only 1% get chosen is kind of discouraging :/
-Jack
It’s extremely important to make sure you have the start-up capital that you need, and getting it in the first place is very difficult. This is good advice for raising capital.
I got really impressed with your post.. Friend of mine is searching details regard SEO… I recommended him about your article and it’s really beneficial…
Thank you for the post..
I agree that you can leave out financial predictions in pitches. If your presentation relies on financial predictions then your pitch has failed.nice and informative blog.
Today, the investment climate for venture capital is more treacherous than ever as exogenous events flame the curse of all investing-uncertainty. Even during the best of times, a severe lack of knowledge and preparation caused the average entrepreneur to struggle with raising venture capital. Thanks for the good tips..
I agree, raising capital is a good advise but it´s extremely complicated to do so nowadays, no?
Venture capital firms, and not the companies seeking capital, typically prepare the term sheet to include the terms under which they are willing to invest their capital.
The most significant happening to advert to generate assets is to convince the investors that your business is deserving of their finance. This implementation that you possess to ensure that your introduction is persuasive. If you are just at start and you are acquire yet to accomplish a merchandising, there is unlikely to be any level of realism.
Raising your capital is difficult, however your ideas would help. . one thing also important on planning to increase your capital is to make sure that your business can be more reliable and trusted than the other. try to market your business to others. this would yield to more funds.
Attention-grabbing and didactic! Thanks!
Thanking for sharing this it really was very informative, and it really does make sense to one, especially now with the recession, and with the credit act here in South Africa they are very strict with giving out loans and funds, but the points here are helpful.
nice post. I think entrepreneurs shouldn’t think they need to raise Venture Capital money to have a “real” business. A real business is one that makes money and makes peoples lives better.
The alternative to VC money is Angel money. We’ve raised Angel Investment and have found it offers a nice middle ground between loss of control and having some fuel on board to build out the business.
Raising capital is the main thing so that you can be strong financially ! but a very good idea can make your capital sound so for that better planning for doing any business can help you out and lead you to the success !
so this post is very good and informative nice work!
with this financial crisis, people and companies are more cautious and they think about the immediate problems, some have lost confidence
Regarding the 1% of business ventures that get funding, what % of the total requested funding did they typically receive?
How to find venture capital for a software startup? I want to send my business plan to venture capital firms. Any advice?
Yeah, I second Lowell’s question. Great timing for the post as an above poster has said, we are in a very volatile economic climate, especially here in the U.S.
A truely intelligent person does not need to compete with anyone.
“When pitching for funding, make sure your presentation delivers”
Presentation is everything when it comes to persuasion.
“Have a strong team in place with some industry experience”
A strong team will give you the needed backup.
Thanks a lot for the information. These are great strategies to raise our capitals and succeed even without having a competition with the competitor site.
It’s important also that raising capital requires for the entrepreneur to have a good command of their financial situation. It would definitely be a turn-off to investors if as a budding businessman you don’t have any idea of how much capital you’ll need to raise.
New bloggers are learning that SEO and social media are imperative to becoming noticed in the virtual web. Thank you for sharing such valuable information.
Thanks for offering this great information. It’s true that many people who set out to get funding do not. You really have to make sure you’re completely prepared and aren’t caught without the answers a potential investor is looking for. I’ve heard many deals go wrong with the investor asks a question and the entrepreneurs who are looking for money can’t answer it.
Thanks for the tips! Never thought about leaving out the financial information before. I think you had a good thought advising people or bring out this tips
Thanks for the tips! Never thought about leaving out the financial information before. I agree with the tip about getting your point across quickly and at the beginning. No need to build up to the point, just get it out there.
Raising capital can be very hard. Thanks for the tips and suggestions ! Hope to see your new updates soon.
Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction. I must definitely agree to you.
Great timing for the post as an above poster has said, we are in a very volatile economic climate, especially here in the U.S.