How Do I Find Venture Capital Investments For My Business?
From Silicon Valley startups to expanding national businesses, venture capitalists (VCs) have paved the way for financial security and innovation for companies in nearly every industry. As private equity investors, venture capitalist firms consolidate funds and look to invest in young companies with the potential for expansive growth.
If you are asking, “How do I find venture capital for my business?” read on to better understand the nuances involved and attain funding.
From financial reviews to due diligence, we will explore the VC partnership process and the expectations involved to prepare you for connecting with the ideal firm for your business.
Establish Your Viability
Before embarking on your journey toward venture capital financing, you need to have a clear vision of your business and your potential for future success.
Venture capitalists do not typically invest in a business until they are commercially viable. Instead, they look to elevate expanding companies with capital infusions and create a formal investment partnership that provides a considerable rate of return (usually via equity, with percentages based on their investment’s amount and risk).
To establish your business’ viability and value, ensure the following factors are firmly in place:
- Team and roles – Early startups are often flexible and informal. As your business begins the process of seeking venture capital, it is necessary to formalize your operating structure and the individual roles within your team—creating a logical chain of command and responsibility. Additionally, VC firms expect qualified and experienced leaders at the forefront of your managerial team.
- Minimal viable product – When will your business begin to turn a profit? The minimal viable product (MVP) refers to the version of your offering that stands the best chance of gathering extensive customer usage feedback while demanding the least amount of production effort and cost.
- Customer base – VCs typically expect considerable market research to establish precisely where your product fits in. Qualify and quantify your customer base with a thorough investigation into the markets you plan to disrupt.
Target The VC Firm For Your Business
With a concise evaluation of your business model, you will be able to pinpoint the VC firms most likely to fund your operation. VC firms are diverse in interest and experience. Therefore, it is essential to do your research to ensure a good match between your business and your potential funding partner.
VC firms may vary by:
- Location – National and international VC firms may specialize in businesses based on their geographic location. Securing venture capital from a localized firm may mean a more hands-on approach and more direct communications.
- Industry – Consider approaching firms with a background in your specific field. A firm with a background in medical tech might not be a good fit for your new entertainment platform. That said, some firms may be interested in pivoting or diversifying their holdings.
- Funding stages – Where some VCs are interested in the earliest funding stages, others might look for businesses that have established a foothold in the market.
Craft Your Pitch Deck and Presentation
After isolating the firms best suited for your financial needs, it is time to craft a pitch deck and follow-up presentation to inform, captivate, and prove your company’s investment potential.
The pitch deck is a series of 10 to 20 slides that provide insight into your company’s financials, market opportunities, and corporate structure. Additionally, your pitch deck should elaborate on topics including:
- Market pain points – Where is your product or service needed? Elaborate on the problem your business solves and how you provide benefit to the customer.
- Key data – Through preliminary research, establish hard numbers related to your business. Dollars spent, population percentages, and customer metrics are all powerful tools to prove your viability.
- Competition and protections – Explain your IP and your business’ unique advantage over current and future competitors. Your networks and services need to be defensible in the greater marketplace.
- Financing needs – Tackle your financial needs head-on. Explain your funding needs, project deadlines, and crucial milestones during your pitch deck.
Share your pitch deck with VC firms to drum up attention, and if they find interest in your business, you may be invited for a formal meeting. Of course, your presentation style may depend on your industry, brand voice, and individual VC expectations, but professionality and transparency are always vital to building a strong relationship with investors.
Review The Terms Sheet
If your pitch is successful, you may begin the negotiation process. When determining a partnership between your business and venture capital investors, the terms sheet is the primary guiding document.
A terms sheet will explain the expectations and various details of an investor partnership, including:
- Shares, pricing, and valuations
- Liquidation protocol
- Growth timelines
- Board and voting organization
- Plans for public offerings
The details and necessary information will vary depending on your business.
Still, entrepreneurs need to thoroughly understand what they are signing up for and how the new partnership will affect operations.
Crucial details for startups include:
- Controlling stake – To retain control over your business, you must maintain a controlling interest. If a VC firm becomes the majority stakeholder in your company, you may be let go or replaced.
- Funding limitations – Some terms sheets may stipulate funding restrictions in the future, leaving your business on the line when additional capital is needed.
Provide Due Diligence
Any sound investment requires proper due diligence. Due diligence is a review process aimed at mitigating risk and protecting investments. Before any deals are finalized, VC firms will insist on a thorough due diligence process to check for red flags.
Common areas for due diligence auditing include:
- Financial information – Cash flow documentation, monthly expense reports, tax information, and more are all part of a customary financial audit.
- Projections and claims – An interested VC firm may be interested in double-checking your research. Additionally, they may question your findings or request additional sources for your data.
- Corporate structure and team – Investors need to be certain that your team’s expertise and experience are credible. VC firms commonly gather details about your team members’ experiences and accomplishments.
Secure Your Finances with CFO Hub
Finding venture capital investments is an extended process, and it may take several pitches, presentations, and recalibrations before you secure the financial partner you need.
Of course, if you are considering partnering up with a financial team to organize your business interests and orient you toward success, CFO Hub is always ready to help.
We are your outsourced accounting experts, capable of back-end financial support, CFO services, and even due diligence readiness to prepare you for your VC investment audit. For an on-demand team and streamlined financial expertise, look no further.