How To Raise Venture Capital for Your Startup

Step-by-Step Guide

 

 

 

Vadim Kotelnikov

Raising funds for your start-up venture
a road map to venture financing

Vadim Kotelnikov, founder of 1000ventures - personal logo VadiK

Inventor Business e-Coach

Author Innoball

Founder Innompic Games icon

 

Venture Financing Gestation Stage Inception Stage Prototype Roll-Out Stage Growth Stage Expansion Stage Maturity Stage Founders: Bootstrapping Methods Business Angels Corporate Investing in External Ventures Venture Acquisitons IPO Venture Capital Firms Dealing with Banks Venture Management Venture Financing Revenue Model VC Investors Venture Funding Stages Venture Financing Chain, Venture Financing Curve: Sources of Funds for High-Growth Firms  

Prepare Extensively Before Approaching Investors

"Most venture capitalists believe that ideas are a dime a dozen: only execution skills count," says William A. Sahlman
Finding suitable investors is one of the biggest challenges for the venturepreneur in a company's early stage.

 

 

 

The major hurdles are:

finding the right investors

convincing them to invest, and

achieving this before the market opportunity is lost.

To target and pursue suitable investors, it is a must for a venture capital seeker to understand their investment strategy and preferences.

 

 

Step-by-Step Guide To Venture Financing Venture Presentation Guidelines Start-up Business Plan: Executive Summary Start-up Business Plan Start-up Business Plan: Executive Summary Milestone Chart Cash Flow Forecast Management Team Start-up Business Plan Due Diligence Worksheet Investors Selection Criteria: Business Anagels and VC Firms Due Diligence: Study Areas Initial Screening: Company Assessment Worksheet Initial Screening: Company Assessment Worksheet Due Diligence Negotiating and Closing the Deal Valuation of a Start-up Company Legal Contract: Structuring the Deal Funding: Typical Terms of Preferred Stock Issued to Venture Capitalists Venture Financing Ten3 Business e-Coach: why, what, and how Venture Management Making the Best of the Venture Capital Obtained Venture Financing - Investment Opportunity Evaluation by Investors Venture Presentation, Initial Screening, Due Diligence, Contract Negotiation  

To communicate successfully with venture capital investors, you need to adapt to their map of reality.

Venture capitalists are financing professionals, they are not experts in your technology area.

 

 

 

VC investors think in terms of business and finance and evaluate you and your venture based on these merits.

You need to learn their language and demonstrate sound venture planning and business skills if you wish to succeed in implementing your idea and develop it into a profitable business.

 

Funding Challenges and Solutions 

Getting Funding for Your Startup

Startup Business Plan DOs and DON'Ts

 

 

 

9 Maxims of Venturing Dennis e-Coach Vadim Venture Planning Checklist Venture Design Change Inititative Winner Business Model Strategy Marketing Plan Customer Value Proposition Learn an Benefit for Competitors How To Overcome Resistance to Change Create Custoers How To Sell to Sixx Thinking Hats Implementations Create Your Own Market Niche Winners vs. Losers Idea Feedback as a stepping-strone to success Comfort Zone 9 Maxims of Venturing Venture Management startup rules Vadim Kotelnikov Dennis

 

 

 

This step-by-step guide will help you achieve your fund-raising goal.

 

Ways to Finance Your Startup

 

 

 

Bootstrapping

Try to finance personally and bootstrap your firm as long as possible until the need for external growth finance becomes evident and unavoidable.

 

Bootstrapping Strategies

Product

Business

 

 

 

   

Decide When To Seek Outside Funds

 

 

 

   

Venture Planning Chart, Definitions, and Concepts

Venture Planning Checklist

Types of Financing & Debt vs. Equity

Alternative Financing: VC is Not the Only Way

 

 

 

 

Select carefully your initial  investor

Not every money is the same. In fact, from whom you raise capital is often more important than the terms. Benefits and advantages vary with the type of investor.

When selecting your investor, you select not just a money source, but a strategic partner. As venture capitalists advise: "Pick your investor carefully, you can divorce your partner but not your investor".

 

Criteria for Selection of Prospective Investors

Ideas for Funding Your Startup Business

Preparing a Venture Proposal

 

 

 

To select the best value-added money source, evaluate the potential investors by:

▪ their experience in similar projects and presence of competing projects in their current investment portfolio, 

▪ the management role they take in investment projects,

▪ their links with other potential investors and critical service providers that will be useful for future company growth stages and rounds of financing,

▪ personal chemistry.


Venture Capital Basics: Recommendations to Entrepreneurs

Venture First Round Funding Trends in Silicon Valley

Private Placements

Sample Venture Capital Finder's Fee Agreements

Investment Opportunity Evaluation by Venture Capital Investors

Angel Investors Funding Application Criteria

Using Intellectual Property Assets to Finance Your Business

Venture Map to Financing

The Funding Round Chart

Dealing with Banks

4Cs of Commercial Lending  ▪  Documentation

 

 

 

   

Introduce Your Project  to VC Investor

 

 

 

 

"In a highly competitive field with many players, you need to be able to articulate your competitive advantage in a matter of minutes, if not seconds."
~ MoneyHunt, Spenser & Ennico

Introduction through referral sources

Introduction to venture capitalists through referral sources they respect improve the odds of securing financing. As venture capitalists themselves say: "You need to have trusted referral or otherwise you just waste your time."

Though services of reputed consultancy companies may be too expensive for first-time entrepreneurs at the early stage, some special mutually beneficial arrangements could be explored. For instance some business incubators and entrepreneurship development institutions have an arrangement with business consultancies according to which the latter charges the start-up entrepreneur only a fraction of their fee at the initial stage provided the enterprise ties up with them for its all future consultancy needs up to a certain milestone, e.g. initial public offering.

Another option would be exchanging consultancy service fees for an equity stake in the company. This option would also be beneficial for the company management, as in order to maximize their profits the consultancy would provide continuous business coaching service to the company they are invested in.

 

 

 

Cold calling on venture capitalists

Do your home work and be ready to make an impressive introduction of your venture within a minute. Investors are usually short on time. Take it as a challenge and try to impress your future financial partners with your professional approach. The introduction will either make or break your opportunity with them. Don't try to explain them your technology idea during this minute. Your business  plan and executive summary are often not of the first importance at this very first stage either. Why would they spontaneously get interested in your stuff? Your first task is to compel your potential investors to find out more and fix the meeting for your venture presentation. To achieve this, you need two documents: Milestone chart and Cash flow forecast.

 

Key Documents to be prepared by Entrepreneur

What Every Investor Wants To Know

Venture Valuation

Language of the Venture Capital

Startup Business Plan

DOs and DONT's

3 DOs and 5 DON'Ts

How VC Investors Evaluate a Business Plan

 

 

 

   

Prepare Your Venture Presentation

 

 

 

 

Pitching Investors

Know how to present your company to prospective angel or venture capital investors. Understand what every inventor wants to know, and nail your investor pitch deck.

  VC Investor Pitch template 10 issues, Startup Venture Presentation

 

 

Before you speak to a venture capital investor you should prepare a brief, well-thought-out, oral presentation. You should include the relevant information on:

▪ The company's business

▪ The company's success ingredient

▪ The company's growth prospects

▪ The way in which you plan to achieve the company's objectives

▪ Your key managers and their backgrounds

The amount of financing you require, and the way in which you will use it.

If the venture capital investor is interested as a result of your approach to him, he will probably ask to see a business plan.


VC Investor Pitch

6Ws    Spotless    8 Issues

Sample Pitch    How To Deliver

Innompic Pitch

9 Maxims of Venturing

How To Address Challenges

 

 

 

   

Prepare Your Project for Evaluation by VC Investors

 

 

 

 

You need to prepare a private placement memorandum and a high-quality business plan for potential investors. Business plans are an important test of clarity of thinking and clarity of the the business. The order of importance that an investor usually places on your business plan components is:

▪ Key personnel

The market and your marketing strategy

▪ Product or service uniqueness and your ability to protect the technology

▪ The financial statements (balance sheet, income statement, cash flow statement).

Explain also clearly how you expect to provide investors with a return on their investment and how they could realize their financial returns. Remember, that VCs don't invest based on financial projections, but is they don't pass the reasonability test, you won't get funded. Financials are a sanity check.

To be on the same length with your prospective venture capital investors, have you business plan reviewed and tuned up by a venture capitalist.


Preparing Your Venture Proposal

Private Placement Memorandum

 

 

 

   

Negotiate, Valuate, and Close the Deal

 

 

 

 

Be prepared to be flexible in your approach because many venture capital firms prefer to structure deals themselves. The venture capital firm may propose a funding package that contains various forms of finance. Because the question of the funding package is not only complex but also very important to you, consult your attorney beforehand. The venture capital firm will value your proposed business and combine this with the required rate of return to decide on the type and level of investment that it is prepared to make in exchange for a percentage of equity proportional to the risk it will incur. The value of your company is the future cash that can be taken out of the business, discounted back to the present.

Get ready to share your project management, if required. Your company should now concentrate on business rather that technology development. Many venture capital firms have pool of trusted professional business managers.

 

Equity Investor's Compensation

Investor Returns, Timing, and Cost of Capital

Ways of Realization of Financial Returns for Investors

Business Negotiation Tips

Venture Valuation and Keeping Your Share

Valuation of a Start-up Company

Small Business Valuation

Valuation Quantification Techniques

How To Structure Your Deal

Structuring the Deal: The Key Terms for Most Seed Investments

Typical Terms of Preferred Stock Issued to Venture Capitalists

Due Diligence

Investigating Management Team and Related Due Diligence Items

Due Diligence Worksheet

Making the Best of the Venture Capital Obtained

 

 

Vadim Kotelnikov

Give innovative entrepreneurs a venture capital fund, and you'll feed few of them for a while. Give innovative entrepreneurs Innompic Games, and you'll feed all of them for centuries ahead!

Vadim Kotelnikov, founder of 1000ventures - personal logo VadiK

Inventor Business e-Coach

Author Innoball

Founder Innompic Games icon