Things You Can Do To Attract Venture Capitalists – If you’re in the market for funds, you probably want to know how you can attract venture capitalists. According to experts, such as Mark Stevens, you need to have more than a good idea. Here are some of the ways you can attract investors.
1. Demonstrate Your Leadership
As the owner or CEO, you are the first person the investors will come into contact with. They want to know what your presence is like. Be an inspiring communicator. You need to be committed to your company. You need to listen well and take advice. Remain calm under pressure. It is also a good idea to demonstrate your problem-solving skills and ability to think as you go. Plus, be passionate about your work in a certain industry. These traits are those of a good leader who can make a company succeed. If you lack in these areas, you may want to consider finding a strong CEO.
2. Organize a Strong Team
Often, one person will try to start a business on their own. However, a strong team is something that investors will look for. Your team can determine whether you get the funds or not. This is because venture capitalists are investing in people, not businesses.
3. Limit Your Number of Investors
Venture capitalists want to see a small number of investors for your business. Therefore, you should keep a table with all of your investors so far. Startups are going to require multiple investors. However, it is best to go for a few large investors rather than many smaller ones. Also, be sure you neatly keep track of your investors. Otherwise, you could end up turning away venture capitalists.
4. Develop an Innovative Product
Investors want to support a truly unique product. This means they want something completely different than anything else on the market. These types of products ensure that there are no competitors. After all, if someone is already using an existing product, they probably will not want to start using yours.
5. Provide Proof of a Concept
While your startup is likely going to be young when looking for investors, venture capitalists will still want proof that it is viable. This means providing proof that customers are willing to pay for your product. Give them a core target market and show that you can sell your product to these people. Also, go for a broad segment of the population. Otherwise, your investors may be skeptical.
6. Show Your Market Research
Venture capitalists aren’t likely to be interested in products that target a niche market. They want businesses that go where the money is flowing. Therefore, you need to research your target market and show that the opportunity is there.
7. Outline Your Conversion Process
Investors want to support people that can convert consumers to their product. They must know your target market and how you will get them to buy your goods. They also prefer to see your uncomplicated process for attracting these customers.
8. Have a Reasonable Cash Burn Rate
If you are looking for money from venture capitals, they will examine your cash burn rate. A burn rate is your operating costs for each month. If you are currently earning revenue, it will be your revenue minus your operating costs. This starting amount is known as your runway. This means how much cash you currently have and when you are going to run out. Having a reasonable runway and cash burn rate is more likely to get you more investors.
9. Offer a Detailed Plan of How You Will Use Their Funds
A venture capitalist will not give you any money unless you can tell them exactly how it is going to be used. Therefore, you may want to have a financial forecast on hand. A financial forecast shows exactly where the money goes, when you spend it and how this impacts a business’s bottom line. If you don’t know how to make one of these, you should hire someone.
10. Give Investors Favorable Terms
One thing that is very important to venture capitalists is how flexible the terms are. They will likely want the right to participate in your management and redeem their investments. They will also likely demand that they get a say in liquidation, board control, valuation, anti-dilution protection, and vesting.
11. Enhance Your Potential
Since investors are lending to high-risk businesses, they tend to want large potential returns. This is because they understand that there is a good chance their investments will be worth nothing in a few years. Therefore, they are looking for companies that could make up for any lost or unearned funds from other companies.
Investors tend to be very selective about where they place their money. Follow these tips if you want to attract venture capitalists to your business.