The opportunities of securing venture capital for startups are quite slimmer today than they were in the past. The competition for market shares by millions of businesses have led to limited sponsorships, this is because of extremely high risks associated with starting a new business. Entrepreneurs and owners of small and medium scale businesses often seek for financial capacity for expansion. The difference with this and a venture capital deal is that VC firms tend to focus more on startups who are looking to get a substantial first time funding while private equity deals more with established businesses who seek a bigger deal.
Securing a venture capital is dicey, this is because venture capital firms have constantly invested on well pitched business ideas and have rolled in large amount of dollars and not all have been successful. So with an archive of experience of what the market place is like and the various pattern of business pitches they have received, it’s pretty easy to track similar patterns that have led to gains or have led to losses.
This may be a little extreme for business owners and entrepreneur but before going to pitch a business idea it would be advisable to go through news feeds and journals from the business world. Find out what the stocks are saying and what companies are leading the market. This usually gives in-depth knowledge of profitability of business ideas, as demand rises, supply grows as well. Venture capitalists keep abreast with the business trends and patterns. They are aware of the statistics of demand and what businesses are leading the stocks.
New rare business ideas
The market is saturated with ideas and businesses that in most cases are competing with one another. New ideas which are rare and extremely limited stand out as unexplored territory which could be a goldmine or landmine. Acquiring venture capital on these sorts of ideas would then depend on detailing and your pitch.
In order for startups to get funding there are certain things venture capitalists look out for;
Is your idea cashable?
Most venture capitalists want you to answer one question… “how much money can this business make for us?” most investors look to get back their investments in folds in the shortest amount of time, that is the standard for good investment as this would enable them invest more on other businesses. To prove how lucrative your idea is, you would have to come up with something bigger than regular concepts. Keep in mind that these investors hear thousands of pitches very frequently and turn down 90% of them.
Relevance to portfolio
A lot of venture capitalist firms operate within a specific niche. The idea is to be able to monitor and evaluate within their knowledge base. You would most likely see VCs who fund only I.T businesses and are strict with it, any idea that deviates or branches out to other niche might become strange lands and then you lose your pitch. It is easier to make a point when your idea revolves around a specific niche which is relevant to the VCs.
Certainty and adequacy of information
In pitching a business idea to a highly educated and experienced set of professional there is a need for substantial information and clarity. If a VC finds a knowledge gap or grey areas where information is lacking or not enough investigation has been made on them, it bounces off as either a high risk investment or an inexperienced entrepreneur. You would also need to buttress your points with real life scenarios, build a real life story which feeds into a motivation for you, and where necessary you can propose a demonstration of your product or services.
What are your achievements?
Now this wouldn’t be out of line owing to the fact that a lot of money would go into this idea. An investor would want to know who you are what your previous accomplishments are and experiences are. This could also be a great avenue to use your professional experiences to WOW the panel. In some cases a great achievement and years of experience can earn you very strong points.
Vote of confidence
You may have worked for certain renowned personalities or have a chain of acquaintances who are themselves successful entrepreneurs. The advantage of networking with these sorts of people is that they can give their recommendations in your favor to VCs and this would enable them trust you with their funds.
These are steps that can ensure that you secure venture capital for your business. Other ways to secure capital is through bank loans, grants, angel investors and philanthropy. Whichever method you choose to obtain venture capital, the first step would be to create a comprehensive and well researched proposal which would give your pitch a boost.