The take off of any business venture can be a herculean task and mind boggling, especially if one considers the inherent and attendant hiccups.
Since any business is usually capital intensive, it won’t be out of place to expect somebody venturing into it to have a second thought.
Some thoughts that’ll pass through the mind of such a person will include how to source for funds, the number of people to employ and how to pay their salaries, the office space needed, how the goods or services will be accepted in the market, and how to outsmart competitors.
If the business venture is aimed at the status of a startup, the problems become more burdening. As a startup, you are expected to be resolutely in charge of the business that was started, generating revenue below $20 million, and have less than 80 employees.
This by any standard is not a mean feat and can knock the Lilly-minded under. However, quite unlike a small or medium scale business, a startup does not need to run to the bank hat in hand.
Grants and loans are not used to run a startup. What you need is a venture capitalist.
Philip Kingston, founder of Trimantium Capital in the piece “4 Ways for Startups to Attract VCs,” gave an insight into how to resolve the problem of funding for a startup.
How then can you capitalize on venture capitalists to grow your startup?
If your company has promising technologies or products that will drive value in either the public market or the eyes of the acquirers, then the venture capitalists are the people for your startup.
There are however some basic requirements you must have before your startup can access the capitalization from any VC.
How do you get connected to a VC? Most VCs expect to be reached through emails or better still, through a relationship with a member of the team. In the instance of an email, they prefer it isn’t a cold email. There must be a referral to the connection.
The company’s founder/ CEO will then be invited to a formal pitch meeting. The outcome of the pitch meeting determines the fate of the company and most times it depends on the composure of the CEO and how questions put across are handled.
The company’s strong point
The company’s views and a strong point has a great deal of role to play in securing the funding. What you intend to go into must not be what every other Jick and Harry out there does.
Your view must be different, sound, interesting, and also challenging. It mustn’t be something for all comers. There should be a tinge of adventure as well as innovation in it. The company must have a kind of uniqueness and also a marketable feature that will easily distinguish it from imitators.
Non-reliance on assumption
Absolute effort must be made to ensure there is no reliance on assumption. Experiments and trials must have been conducted to arrive at foolproof ideas. Cocksure and tested results must be presented to the VC’s team.
Companies are picked for funding after considering their visions. A company that has a clearly marked out program for the future has better opportunities of being funded. The vision is expected to be bold.
“I think the first measure for a startup is: is it something new--a process, a product, a category, a business model, an ecosystem.” - Ayah Bdeir
Besides having a unique business idea like the case of Facebook, Microsoft, Apple or even Colorlib for WordPress theme platforms, a bold vision will help you build a great business blueprint that’ll guide you and potential VCs to take the right risks and make the right investments as the big picture and the expected turn-out is always in mind.
Get a lead partner
It will be hugely beneficial if the founder is able to get a lead partner among the VC’s team. The team is expectedly made up of human beings and nothing does the magic better than someone dropping a nice word here and there for you.
Individuals tend to have their strong and weak points. A team member may be more inclined in the tool's direction, while another may favor clinical materials, a kind word may bring about a more favorable consideration.
Set up a crack team
It is expected that the VC team will carry out a wholesome investigation about the founder, for this reason, a crack team of professionals must be on the ground. A beautiful idea will not execute itself.
No individual can single handedly transform an idea into a money spinning venture. The team will want to see a set of ambitious and credible men and women who will convince them of their ability to deliver before they can cough out the money.
Receptiveness to coaching
VCs don’t just drop the money and scram only to appear on pay day. Definitely, that’s not how they operate. They mostly take part in the processes of the company.
Some VCs even have team members as members of the Board of Directors, between 25 to 55 percent equity ownership of the company is usually required by VCs.
Since they are going to be part owners of the company, they expect that the founder must be amenable to coaching and receptive to instructions and innovative ideas.
One factor that seriously affects the outcome of the founder’s performance at the pitch meeting is the composure.
Lakshmi Balachandra, an assistant professor at Babson college in the piece: “How Venture Capitalists Really Assess a Pitch.” explained that passion should not be over-emphasized. She rather called for a calm demeanor, which would portray sound leadership strength.
The founder should not exhibit over enthusiasm and exaggerated sense of hardworking. It will be wrong to send the signal that you are dying to do this job to the VC team at the pitch meeting.
To conclude, it is rather obvious that a determined founder has now got a leeway of overcoming the bottlenecks that are encountered when setting up a business, especially as regards funding.
What the founder sets out to do is, to work tediously to meet up with the demands of the VCs. A thorough and painstaking work will afford the company the opportunity of capitalizing on VCs for the growth of its startup.