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How to target a venture capitalist for business financing

How to target a venture capitalist for business financing

Most startups begin with early seed funding from friends and family, angel investors, or accelerators

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Venture capital may be the most difficult to secure, primarily because VCs have very specific investment strategies, want to invest for a relatively short period of time (three to five years) and may want to be involved in your business’ operations and decisions. VCs also usually want to invest sums larger than a few million dollars.

If you’re already past this step and are looking for longer-term funding, it’s important to approach VC firms the right way. Kisch said it’s crucial to find the right investor for the stage your business is in. There are thousands of VC firms out there, so think critically about your business and which investors make the most sense.

“Finding the right investor who is at the right stage of where your company is but [that] also has some exposure to the environment that you’re going to be in – I think that’s the best way that you’re going to have a productive relationship,” Kisch said.

Once you’ve developed a shortlist of VCs that invest in your space and can provide the level of guidance and added value you’re looking for, it’s time to set up a formal process.

With your list in hand, Berman recommends spending one to two weeks trying to make that initial contact with the company. Once you’ve made contact, keep the company up to date on business developments and other information that are relevant to that investor. This ongoing conversation can help you build relationships with investors. When it’s time to raise funding, you’ll have to pitch the VC firms you’ve been in constant communication with.

“The CEO really needs to commit to raising money and doing what’s called a roadshow to get in front of a large number of venture funds to find the right partner,” Berman said.

Berman said the whole process, from initial meetings to closing a deal, can take anywhere from 60 to 90 days, or even longer, so plan accordingly. He also recommended looking for funding well before your business will need it.

How to stay motivated

One of the biggest variables throughout this process is motivation. For a startup, rejection is part of the journey. Staying motivated during trying times can be difficult, but it will be the backbone of your business’s success.

Kisch has been through five rounds of funding with various startups he’s worked for. He said one thing that has been helpful for him throughout the screening process is that he has tried to maintain low expectations so that rejection doesn’t overwhelm him. Rather than seeing it as a failure, Kisch sees rejection as part of the process.

“If someone says no, I just think, ‘That’s cool, I guess I’m just one step closer to a yes,'” he said.

The other takeaway from rejection is how you adapt and respond. Kisch said that a stream of critical feedback allows you to better your product and hone your pitching skills.

He said a good way to think about it is you’re not getting rejected because your idea or product is bad; it’s because it can be slightly improved or you haven’t developed the skills to pitch it in https://worldpaydayloans.com/payday-loans-il/milledgeville/ the most effective way. This keeps the responsibility in your hands without adding any pressure. Everything is a work in progress, and even today’s most successful companies had to deal with challenges at one point.

“Raising money from people is a very difficult thing,” he said. “You just have to sort of roll with it and be aware that there are a lot of companies that were initially rejected that became generation-defining companies.”