Even though it can be tempting to enthusiastically plow ahead with capital acquisition right after hatching a great business idea, there is some important knowledge that entrepreneurs must learn and decisions that they need to make before they start pursuing venture capital opportunities. Here are some preparation tips that will give you the best chance to secure funding for your new venture.
Decide on the Scope of Your Business
What type of enterprise do you want to start? Is your dream to start your own local business with one or two locations or do you want to be the next Jeff Bezos or Bill Gates? The decision about what you want the scope of your business to be is important for many reasons, one being that it will influence how you go about attracting capital to start it. First of all, deciding on the scope of your business will help you craft a cogent proposal for the investors you will approach. Then, it will help you narrow down your list of investors to approach to the ones that specialize in the type of business you want to start.
Give Your Idea Time
The formulation of a business idea is most often a process over time that goes through many revisions.
Two questions to keep in mind when you are crafting your business plan are, who is your customer and what can you do for them? Knowing who your customers help you anticipate their wants and needs so that you can figure out what you can do for them. Even after you have decided on a general direction for your start-up, be prepared to make changes based on feedback from investors, partners, and market research.
Learn the Vocabulary and the Rules
If you are new to the entrepreneurial world and have little to no experience in business, it pays to educate yourself about the rules of the venture capital game, and the vocabulary used in the playing of it. Learn about the different methods that can be employed to value a start-up venture, and make sure that you know how to converse with them in regards to your new business. Another concept to become familiar with is stock options, because they are commonly offered to the early investors of fledgling business enterprises.
Pick Excellent Business Partners
Your future business enterprise will need enthusiasm, commitment, business expertise, and leadership ability, and it cannot all come from only you. This is why it is important to surround yourself with an excellent management staff who know what they are doing and are dedicated to making your entrepreneurial idea work. They will also need to work well under pressure and be comfortable with quick decision making. For the most successful venture capitalists, the team that you have assembled around you is just as important as the business idea you have decided to pursue.
Best known for his role on the TV show “Shark Tank,” Chris Sacca is a superstar venture capitalist that picks entrepreneurial start-ups to invest in that have teams with a winning combination of vision, drive, expertise, and ability. His vision of picking exceptional start-ups has led Sacca to invest in Twitter, Uber, and other now high-profile tech companies when they were in their early stages. With a net worth in the billions, he has retired from active investing with his firm Lowercase Capital and appearances on “Shark Tank” to move on with new ventures in his life, including plans for a podcast.
Get Good Advice
Find a mentor that can relate to where you are right now and understands where you want to go in your career, and keep in mind this may not be your most high profile contact. Someone who started out in similar circumstances and is willing to take the time to form a professional relationship is a good choice for an advisor.
Getting good advice from the right people can also be part of the investment package in a new venture. The value that an investor can bring to the table also includes advice and guidance along with dollars. This value-added proposition enables you to learn the ropes of the entrepreneurial world while achieving your goals to acquire business capital.
Cultivate Relationships With Potential Investors
Before you finalize your business plan, start cultivating relationships with potential investors through various networking opportunities and mutual business contacts. Opportunities to get face time with possible investors abound at industry events and local organization meetings. This helps avoid the awkward cold call approach to possible investors that rarely gets results. Once you have a relationship with a couple of potential investors, you can bring up your proposal. Even if they do not take advantage of the opportunity, they may know someone else that would be just the right investor for your business plan.
The process of acquiring business capital for a new venture is not for the impatient. Your journey to a fully-funded enterprise can be less rocky if you learn vital business skills to successfully navigate the venture capital waters.
- Pros and Cons of Financing a Business
- Why Investors Say “No”
- What Investors Want Before Funding a Business
- How to Raise Money to Start a Business
- Why Business Plans Fail