Five Tips to Get Venture Capitalist Funding

Venture capitalist funding is one of the most preferred ways of getting funds for investment. It is one of the most sought-after means of financing a startup. In the simplest terms, venture capital firms invest in companies in exchange for equity in the business, hoping to see a positive return on their investment. The main two categories of venture capitalists are; private and institutional investors. Getting venture capital funding will cost you time and money. VCs will ask you to pitch your business to feel for the company and your ability to execute. They’ll ask for a business plan, pitch deck, and other documents that will need to be created. The following are some tips that will help you get the funding.

Identify Your Goals and Have a Solid Plan

 Venture capitalists are willing to invest their money under the assumption that it is going to generate big returns. So one of the most obvious things they are going to assess is your startup plan and how it correlates with your ultimate goals. Therefore, it is important to have a solid plan and get your goals right. If you are asking a venture capital firm to invest money in your business, you had better have a plan. Your plan should stand out, scoring highly on all the things they are likely to assess as most of these firms have seen thousands of plans.

 The importance of also knowing your market cannot be understated. 

 What is your business, and what is its competitive advantage? Who are you trying to appeal to? How do you make money? You should know all of these things before you ask a VC firm for money. 

 Knowing the right venture capital firm that has a history of investing in the industry in which your company is located is also important. 

Patent Your Intellectual Property

 If your startup is relying on some new tech or a new modified process, the first step is filing for a patent before embarking on the hunt for investors. A patent attorney can guide you through this process. Remember, the process of obtaining a patent can take several years, so you need to start early. You will also need to budget for this cost. Not every startup has enough cash to pay for a patent, so consider filing for a provisional patent. This is a much quicker process and is valid for one year. You still have the right to file for a full patent with a provisional patent. But you should be ready to file for the full patent if you need to.

Sought For Funding At the Right Stage

 The ripest stage for a startup to get funding is usually before it hits the five-year stage, with the optimal time being within the four-year mark. Rarely do businesses receive funding beyond eight years. Venture capital firms are usually after the fast growth period that your startup will undergo. Venture capitalists are looking for companies that are ready to scale in the immediate future. There’s a compounding effect to this. If you’re too early and fail, you’ll have time to try again. But if you’re too late, you’ll have fewer opportunities to try again since your window of opportunity will have passed.

Master the Term Sheet

 The term sheet is basically a document outlining the preliminary terms of venture capital financing. It has three major sections; finance, governance, and liquidation sections. When writing your plan, it’s good to be aware of the term sheet so that you can incorporate the most important aspects of it into your plan. The term sheet can be used to establish crucial terms of the venture financing. It should be signed by the company founders, the investment bank, and the venture capital investor.

Always Prepare For Due Diligence

 If the venture capitalist decides to move forward, they will want to meet with you and your team to go over the finer points of the deal as well as to confirm what you said in your pitch. This is one of the most important processes as it’s where you put your cards on the table and cement the terms of the deal. Therefore, you should begin the preparation of this process before you dive into the venture capital process.

 The above are some tips that upcoming startups can deploy when pursuing venture capital funding. The company should always prepare the necessary paperwork and other documents likely to be deemed necessary shortly. It is also important to seek financing during the company’s window of opportunity. It’s better to be early than late when gauging the ripe stage of your company. If you’re late, the window of opportunity will have passed, and getting funds may be tricky. Early preparations are also crucial when pursuing funding.


TBN Editor

Time Business News Editor Team