Venture Capital (VC) is a type of private equity and a form of financing that is provided by companies and business entities to comparatively small, new and emerging firms that are seen as a potential of having a high growth in future – be it in numbers of employees, annual turnover, or both.
So a venture capital can also be defined simply as a private (or institutional) investment made into the early stage of start-up companies. We have also covered startups from Kolkata, Lucknow and other major cities of India.
Any venture involves some amount of risk and uncertainties with respect to the expectations of gains and profits and is therefore sometimes referred to as Risk Capital or Potential Risk Capital. Venture Capital is the money that is invested in businesses that are small but have huge potential and the people who invest this money are called Venture Capitalists.
The venture capital investment is made when a venture capitalist buys shares of such company or firm and becomes a financial partner in the business and has some stakes in it. The venture capital investment involves high risk, long term horizon, an equity participation and capital gains. It has a lack of liquidity. Venture Capital investments are made in creative and innovative projects, and the Venture Capitalists are a part of the management of the company.
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Venture capital is about capturing the value between the startup phase and the public company phase.
- Fred Wilson, Venture Capitalist
So, if you are new upcoming business person with a start-up idea that has potential and growth prospects, Venture Capital funding is a way of kick starting your business. There is a process that needs to be followed typically for the funding process and it has four phases.
a) Idea Generation – this is the initial step in approaching a Venture Capital and you have to submit a business plan which will include the relevant details and information about your business proposal. A detailed analysis will be done by a VC to decide whether to take up the project or not.
b) Introductory Meeting - once your business proposal is selected by the VC from previous stage, there will be a one-to-one meeting that is called for discussing the project further in details. After the meeting, the VC will decide whether to move forward with your project or reject it. It is very important for the presentation to be as interesting and attention grabbing as possible.
c) Due Diligence – depending upon the nature of the business, the due diligence phase will vary. This stage involves solving of queries related to customer references, product and other business strategies that needs evaluations, management interviews, and other such exchanges of information during the given time period.
d) Term Sheets and Funding – if the business proposal passes the due diligence then the VC offers a term sheet (which is a non-binding document explaining the terms and conditions of the investment contract). The term sheet is usually negotiable and the consent of all the parties is must. They should all agree. And after the completion of legal documents and legal due diligence the funds are made available.
Considering that there is a high risk involved in the venture capital investments but also a high return expected from it, one should do a thorough study of the project being considered, weighing the risk return ratio that are expected. One needs to do the homework both on the venture capital being targeted and the business requirements. As during the time of pitching, the Venture Capitalists have to be impressed by your presentation and give you the required financing thereafter. It is especially important for budding entrepreneur to preform excellently as the collaboration will yield loads for him.
So let us discuss what are a few things a VC notices in a pitch for your presentation about the business project, and while we are doing that we will also see how you can get the VC impressed and be in your favor.
a. Basic adequacy and professionalism that is reflected in your conduct
You represent your business as its CEO and the CEO is supposed to stand out, you should be able to make an impression on the VC that he/she remembers you. So the formal attire, the eloquence and the way you behave is important. It is a simple characteristic but it is indeed of utmost importance.
b. Confidently deliver your presentation
You should come to the investors meetings rehearsed and prepared. The VC immediately notices that you have come prepared or not. Don’t blow your shot by heckling or using a sentence that gives the VC an impression that you didn’t come prepared or are unserious about it. The VC will not move forward with you unless you are prepared well.
c. Be punctual
You have to arrive on time for the meeting, so try to come at least 15 minutes early. Consider well in advance about the traffic, other delays that might occur, and then proceed with a well thought provision of time. Give a through overview to your slides and arrange them. Do all this before making your way to the conference room. That way you are prepped and ready to go.
d. Carry Hard Copies
The business firm might be willing to invest lakhs in your project, but all that depends upon the pitching at the end. And your pitching depends on the slides and decks of your presentation. Life is full of uncertainties, but you can be prepared for the ones you can foresee. If your electronic mediums give up, or are not connecting, this might turn out to be very disastrous. But if you carry hard copies printed out, you can carry on with the presentation. It is very helpful in case of emergencies and shows the VC that are responsible and care about the presentation. A positive impact is made and it shows your credibility.
e. Make first impression within seven seconds
While being in the conference room, conduct yourself as professionally as you can. Stand up (to show respect) and extend your hand when the investor enters the room. Smile and look the investors confidently, and introduce yourself. These simple steps work long ways.
f. Rule of Four
You should use rule of four while presenting, which means that you should stand up if you are presenting to more than four people. It shows the amount of due respect to the audience you are catering to. Not doing so will work against you tremendously.
g. Prepare follow-up questions
It is important to win the trust and faith of the investors, and by answering the questions asked during the presentation it communicated your knowledge to huge extents. So be prepared to answer questions you see that could be asked.
So there you have it, a few factors that you need to be concerned about as the VC will notice these during the pitch.