Continuation from yesterday……(How To Raise Money From Angel Investors)
And what does being ready mean?
First, you should already have something built. While having a finished product is your best bet, a prototype or a beta type of a situation might work as well. Keep the following in mind. Very few angel investors or venture capitalists will invest in an idea. In fact, I have never seen it happen personally, although I have heard about it.
Second, have a detailed business plan written out. It is a must have to show potential investors. You must illustrate in a very clear fashion that you know what you are talking about, what the market forces are, financial, etc…. Simply put, without a detailed business plan most angle investors will not be capable of properly evaluating the legitimacy of your investment opportunity.
Again, the threshold here is very easy and straight forward. If you cannot put a legitimate business plan together, how are you supposed to run a business? Chances are, you cannot. Therefore, if you can’t put it together, you have no business approaching either angel investors or venture capitalists. Do not waste their time as it is almost a certainty that you will not get anywhere.
Everything that was mentioned above in regards to angel investors applies towards venture capitalists, but on a bigger scale. That means more expansive capital, higher threshold requirements and for the most part a bigger capital investment.
The keyword for venture capitalists is TRACTION.
If you are starting out with just an idea, at times it wouldn’t even be appropriate to approach venture capitalists. You are not ready and they are not interested. In fact, think of venture capital as growth capital. For the most part, venture capitalists are interested in growth concepts that are already getting customer traction.
Still, if you do decide to approach venture capitalists the best way to do so is through your network or their existing portfolio companies. An introduction is always the best possible way, but it is not an option for many. Try to avoid a shotgun approach here. Meaning, you would be much better served researching any given venture capitalist for some time and coming up with a unique proposition as to why they should listen to you. This will guarantee a much better success rate as you unlikely to hear back from anyone if you attempt to contact them in mass. Weather it is through email, mail or in any other fashion. Finally, finding venture capitalists should be relatively easy as multiple lists are available online.
Personally, I have mixed feelings about venture capitalists. They are wonderful and very smart people. Yet, they are under constant pressure from their own investors to hit that next home run or to earn a significant positive return. As such, their interests are not necessarily aligned with yours. It is their job to make as much money as possible and they will do whatever is necessary to get that done. Sometimes that includes destroying companies they have invested in or replacing top management, including you. Be aware of it, but don’t blame them. That’s just how the game is played at that level.
To Be Continued Tomorrow…….(Why Am I Seeing This On A Financial Website?)
Venture Capital Google