Do you feel like venture capital funding is right for your business? Before you approach investors, you will need to assess how much you need and the value of your business. You will also need to know how to pitch to investors. Here are the steps involved before you can secure funding.
Determine Business Valuation
Get a professional appraiser to help you with this. A venture capitalist will take a particular percentage of your business in exchange for financing. And the higher the valuation, the more money you will get.
Figure Out the Funding Needed
When determining how much money you should raise, factor in the capital you need and the stage your business is at. However, always have a contingency plan in case you raise more or less than what you need.
Work on Your Pitch
For you to get venture capital, you need to prepare a solid pitch. As much as businesses are different, generally, you will have to prepare a pitch deck, a solid business plan, and a product demonstration. Remember, you want the venture capitalist to have an interest in your product. So this is the step you should give the most attention to.
Find the Investor
The next step is finding investors. Do not just have one investor in mind. Make a list of the investors you think are likely to invest in your business. After that, you can start networking to connect to such investors and pitch yourself.
Once you find a potential investor, the negotiations begin. Talk about control issues and the kind of power the investor will have in your company. Keep in mind that negotiations are all about giving and taking.
Prepare for Due Diligence
Expect the venture capitalist to do some due diligence. That means being prepared to answer questions such as who are your current customers, your team, the market, your competition, etc.
Closing the Deal
The last step is closing the deal and signing contracts. Before you can sign anything, read the contract thoroughly. Better yet, have a lawyer to help you go through it. Take time to review the legal documents so that you know what you are getting into and your legal responsibilities.
At WCK Financial, we understand that raising capital is not always easy for business owners. However, these tips can come in handy when you are trying to raise venture capital. We also offer a variety of loan products that can help businesses with the funding they need. Give us a call today.