Tips
on Preparing for Funding
According
to April Young of Imperial Bank, venture capitalists fund only 0.5%
of
all plans
they see.
According
to Peter Barris of New Enterprise Associates, only 1% of the plans
his venture capital firm receives get funded.
Dos:
- Let your integrity, honesty,
and passion shine through.
- Be fully prepared. It
is impossible to over prepare for a meeting with a venture capitalist
(VC), and every bit of preparation effort will help you win them over.
- Know your financials.
You need to know:
- How revenue turns
into profit.
- What drives costs.
- Where your cash goes and
why.
- When and why you will become
profitable.
- When and why you will become
cash flow positive.
- When you will run out of
money.
- Know your intellectual
property. Be crystal clear about what you have that is unique to you
and that is hard for others to duplicate.
- Know your competitors,
and be able to explain why you will beat them.
- Be ready to respond when
asked what you would do if you had even more money than you are asking
for.
- Select a funding source
-- angel or institutional -- based on how well their investment emphasis
matches your business. The table below applies this logic to VCs.
|
Funding
Firm
|
Emphasis
|
Recent
Deals
|
| Blue Water
Capital |
Expansion
stage |
|
| Columbia
Capital |
Like to
be first and to lead in plays that involve Internet and Telecom |
Saville |
| Draper Atlantic |
Go in early
and be the only one; Internet Cowboy; they are a network of local
funds |
|
| Steve Walker
& Associates |
Likes to
be first with seed money |
RetailMetro |
DON'Ts:
- Don't plan on getting
a small percentage of a large market without also detailing what you
will do that builds your business' share from the bottom up.
- Don't ask for more than
you need too soon as you won't be ready for it, and you have to give
up too much equity to get it. It is better to get funding in small bites,
hit your milestones, and go back for more.
|
