Five Steps You Should Follow For Raising Venture Capital | Pete ...

Before you present yourself to a venture capitalist to ask them to invest into your business, you?ll need to understand what to expect from the investment process. Here are some things for you to consider:

1. Preparing communications and due diligence materials

Make sure that all of your pitches are fine tuned, and ready to be presented. This means your elevator pitch, your emails, your business plan and your slides should be ready for presentation. Pay particular attention to your operations plan, because this will outline the risks involved with investing into your business. Also make sure that your executive summary is in great shape; it makes the first impression upon your investors.

2. Developing a master list of venture capitalists to contact

Get access to a private equity firm database program, and use it. Plug in your key defining factors ? such as location, sector, and growth stage ? to narrow the list. Scour the websites of the VCs on your list to verify the resulting data, and confirm that they are actively investing. The more VC firms you eliminate from your list, the more powerfully you can focus your efforts on the firms that are most likely to match your business profile.

3. Start contacting VCs on your list.

You?ll need to determine the right people to contact on your list. Managing partners are usually too busy to entertain you. Partners have the time to speak with you and they have company clout. Associate partners read the bulk of business plans, but they have less clout than partners. Venture partners have the most time, but they also have the least amount of power. Therefore, the higher up the ladder you can go, the better it would be for you. Having said this, nurture your existing connections with teaser emails.

4. Meeting with venture capitalists and fulfilling due diligence

Deliver your slide presentation. Answer the three most common questions VCs ask in meetings: How much capital do you need, what is your company worth, and what is your exit strategy? Get a yes, no, or maybe as to whether the firms would like to invest in your business. Deliver all requested due diligence materials: company background, management background, business plan, financials, capitalization table, leases, employment agreements, purchase or sale agreements, letters of intent, etc.

5. Negotiating the terms

Created a competitive investment atmosphere from the very beginning, by approaching multiple investors at once. When actually negotiating terms, look out for ?liquidation preference.? Try to secure a 1X liquidation preference, which guarantees the VC will recoup their investment in an IPO or buyout ? rather than 2X or 3X, which doubles or triples their take before you see a cent. Also beware of the ?participating preferred liquidation preference.? This gives investors their 1X, 2X, or 3X liquidation preference, plus their percentage share of all proceeds of a buyout, before you see a cent.

If you?d like to know how to create a professional business plan quickly and easily, then consider using a simple business plan template, so you finish your plan in hours, not days, weeks or months.

Source: http://www.petebenevides.org/business-2/five-steps-you-should-follow-for-raising-venture-capital/

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