Write Winning Proposals For Venture Capitalists

You need to secure money for your project. You visit venture capitalists to see if you can get that money. A venture capitalist views your project as a pure investment. A venture capitalist has no emotional attachment unlike you. You need to write a proposal that is structured around a venture capitalists needs, not yours. What may interest you may have no relevance to your potential funder. You need a business plan that is 'investor-focused'.

An investor focused business plan contains relevant information about your project. It addresses concerns, questions and should allay fears that any potential venture capitalist may have. It should meet their needs exactly. Venture capitalists exist to make substantial gains. They want to see a good return on investment. By compiling an investor focused business plan, it will be clear to Venture Capitalists that you are focused, prepared and competent.

There are four areas that need to be addressed:

Management Responsibility

Know Your Markets

Know Your Product

Know How Management, Markets and Product Make Money

Management Responsibility

The strength of management assigned to the project can make or break your proposal. Venture Capitalists need reassurance that you can manage their money. They will want to see a demonstrable track record in areas specific to the project you are pitching. The ability of management will be tested so be very prepared.

Know Your Markets

Venture Capitalists will need to see where your income will be coming from. Your company must demonstrate a strong understanding of your customer base and be able to fulfil their needs. Your plan also must address any potential new or growth markets. Illustrate any research you have conducted to emphasise this.

Know Your Product

Venture Capitalists will want to fully understand your product. They will want you to demonstrate how the product that they are funding will attract customers. The information in this section must be extensive and also feature any potential expansions or upgrades that your product will feature. This will show that you have thought about long-term growth.

Know How Management, Markets and Product Make Money

It must be demonstrated that management can create links and paths between customers and product. This element must be very strong as ambiguous information, or an assumed relationship will scare off any potential funder. Create a step-by-step guide of how their money will be processed and how the customers money will be received. This has to be clearly shown.

Tie in these points together and you are already in the top 3% of all venture capital submissions. Good Luck!

The Term Sheet's Role in Raising Venture Capital

Entrepreneurs and companies who are seeking venture capital often negotiate with one or more venture capital firms on a number of important issues. These issues include the amount of capital to be raised, the investment terms, etc. The document which summarizes these terms is known as a "term sheet."

The term sheet is similar to a letter of intent, that is, it is a nonbinding summary of the key points of the transaction. These points are later covered in detail in the Stock Purchase Agreement and related agreements signed at the time of execution of the transaction.

The value of the abbreviated term sheet format is that it speeds up the process of consummating a transaction. Specifically, it allows the parties to agree on the general terms of the transaction rather than having to debate less important details. In addition, because it is not binding, it allows the parties to take their discussions to the next level without the danger of committing too much. Note, however, that some parts of a term sheet may be binding. Typically the binding aspects only refer to confidentiality and disclosure issues.

Venture capital firms, and not the companies seeking capital, typically prepare the term sheet to include the terms under which they are willing to invest their capital. Alternatively, when seeking capital from angel investors, firms typically create their own term sheets for the angels to review. This fact tells a bit about the balance of power in an investment transaction. Venture capital firms are often more sophisticated and have more power than the companies seeking capital. Alternatively, angel investors are typically less sophisticated and have less power, and are more prone to consider the investment terms as laid out by the company seeking capital.

Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction. It is then up to the investor and company to agree upon the details.

Write Winning Proposals For Venture Capitalists

You need to secure money for your project. You visit venture capitalists to see if you can get that money. A venture capitalist views your project as a pure investment. A venture capitalist has no emotional attachment unlike you. You need to write a proposal that is structured around a venture capitalists needs, not yours. What may interest you may have no relevance to your potential funder. You need a business plan that is 'investor-focused'.

An investor focused business plan contains relevant information about your project. It addresses concerns, questions and should allay fears that any potential venture capitalist may have. It should meet their needs exactly. Venture capitalists exist to make substantial gains. They want to see a good return on investment. By compiling an investor focused business plan, it will be clear to Venture Capitalists that you are focused, prepared and competent.

There are four areas that need to be addressed:

Management Responsibility

Know Your Markets

Know Your Product

Know How Management, Markets and Product Make Money

Management Responsibility

The strength of management assigned to the project can make or break your proposal. Venture Capitalists need reassurance that you can manage their money. They will want to see a demonstrable track record in areas specific to the project you are pitching. The ability of management will be tested so be very prepared.

Know Your Markets

Venture Capitalists will need to see where your income will be coming from. Your company must demonstrate a strong understanding of your customer base and be able to fulfil their needs. Your plan also must address any potential new or growth markets. Illustrate any research you have conducted to emphasise this.

Know Your Product

Venture Capitalists will want to fully understand your product. They will want you to demonstrate how the product that they are funding will attract customers. The information in this section must be extensive and also feature any potential expansions or upgrades that your product will feature. This will show that you have thought about long-term growth.

Know How Management, Markets and Product Make Money

It must be demonstrated that management can create links and paths between customers and product. This element must be very strong as ambiguous information, or an assumed relationship will scare off any potential funder. Create a step-by-step guide of how their money will be processed and how the customers money will be received. This has to be clearly shown.

Tie in these points together and you are already in the top 3% of all venture capital submissions. Good Luck!

The Term Sheet's Role in Raising Venture Capital

Entrepreneurs and companies who are seeking venture capital often negotiate with one or more venture capital firms on a number of important issues. These issues include the amount of capital to be raised, the investment terms, etc. The document which summarizes these terms is known as a "term sheet."

The term sheet is similar to a letter of intent, that is, it is a nonbinding summary of the key points of the transaction. These points are later covered in detail in the Stock Purchase Agreement and related agreements signed at the time of execution of the transaction.

The value of the abbreviated term sheet format is that it speeds up the process of consummating a transaction. Specifically, it allows the parties to agree on the general terms of the transaction rather than having to debate less important details. In addition, because it is not binding, it allows the parties to take their discussions to the next level without the danger of committing too much. Note, however, that some parts of a term sheet may be binding. Typically the binding aspects only refer to confidentiality and disclosure issues.

Venture capital firms, and not the companies seeking capital, typically prepare the term sheet to include the terms under which they are willing to invest their capital. Alternatively, when seeking capital from angel investors, firms typically create their own term sheets for the angels to review. This fact tells a bit about the balance of power in an investment transaction. Venture capital firms are often more sophisticated and have more power than the companies seeking capital. Alternatively, angel investors are typically less sophisticated and have less power, and are more prone to consider the investment terms as laid out by the company seeking capital.

Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction. It is then up to the investor and company to agree upon the details.

Write Winning Proposals For Venture Capitalists

You need to secure money for your project. You visit venture capitalists to see if you can get that money. A venture capitalist views your project as a pure investment. A venture capitalist has no emotional attachment unlike you. You need to write a proposal that is structured around a venture capitalists needs, not yours. What may interest you may have no relevance to your potential funder. You need a business plan that is 'investor-focused'.

An investor focused business plan contains relevant information about your project. It addresses concerns, questions and should allay fears that any potential venture capitalist may have. It should meet their needs exactly. Venture capitalists exist to make substantial gains. They want to see a good return on investment. By compiling an investor focused business plan, it will be clear to Venture Capitalists that you are focused, prepared and competent.

There are four areas that need to be addressed:

Management Responsibility

Know Your Markets

Know Your Product

Know How Management, Markets and Product Make Money

Management Responsibility

The strength of management assigned to the project can make or break your proposal. Venture Capitalists need reassurance that you can manage their money. They will want to see a demonstrable track record in areas specific to the project you are pitching. The ability of management will be tested so be very prepared.

Know Your Markets

Venture Capitalists will need to see where your income will be coming from. Your company must demonstrate a strong understanding of your customer base and be able to fulfil their needs. Your plan also must address any potential new or growth markets. Illustrate any research you have conducted to emphasise this.

Know Your Product

Venture Capitalists will want to fully understand your product. They will want you to demonstrate how the product that they are funding will attract customers. The information in this section must be extensive and also feature any potential expansions or upgrades that your product will feature. This will show that you have thought about long-term growth.

Know How Management, Markets and Product Make Money

It must be demonstrated that management can create links and paths between customers and product. This element must be very strong as ambiguous information, or an assumed relationship will scare off any potential funder. Create a step-by-step guide of how their money will be processed and how the customers money will be received. This has to be clearly shown.

Tie in these points together and you are already in the top 3% of all venture capital submissions. Good Luck!

The Term Sheet's Role in Raising Venture Capital

Entrepreneurs and companies who are seeking venture capital often negotiate with one or more venture capital firms on a number of important issues. These issues include the amount of capital to be raised, the investment terms, etc. The document which summarizes these terms is known as a "term sheet."

The term sheet is similar to a letter of intent, that is, it is a nonbinding summary of the key points of the transaction. These points are later covered in detail in the Stock Purchase Agreement and related agreements signed at the time of execution of the transaction.

The value of the abbreviated term sheet format is that it speeds up the process of consummating a transaction. Specifically, it allows the parties to agree on the general terms of the transaction rather than having to debate less important details. In addition, because it is not binding, it allows the parties to take their discussions to the next level without the danger of committing too much. Note, however, that some parts of a term sheet may be binding. Typically the binding aspects only refer to confidentiality and disclosure issues.

Venture capital firms, and not the companies seeking capital, typically prepare the term sheet to include the terms under which they are willing to invest their capital. Alternatively, when seeking capital from angel investors, firms typically create their own term sheets for the angels to review. This fact tells a bit about the balance of power in an investment transaction. Venture capital firms are often more sophisticated and have more power than the companies seeking capital. Alternatively, angel investors are typically less sophisticated and have less power, and are more prone to consider the investment terms as laid out by the company seeking capital.

Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction. It is then up to the investor and company to agree upon the details.

Finding a Venture Capital Firm

Many ventures are faced with the challenging task of raising venture capital. The first part of this process is finding the right venture capital firm (VC). While this may seem simple, it isn't. There are thousands of venture capital firms in the United States alone, and going after the wrong ones is one of the most common reasons why companies fail to raise the capital they need.

When seeking a venture capital firm, there are six key variables to consider: location, sector preference, stage preference, partners, portfolio and assets.

Location: most venture capital firms only invest within 100 miles of their office(s). By investing close to home, the firms are able to more actively get involved with and add value to their portfolio companies.

Sector preference: many venture capital firms focus on specific sectors such as healthcare, information technology (IT), wireless technologies, etc. In most cases, even if you have a great company, if you fall outside of the VC's sector preference, they'll pass on the opportunity.

Stage preference: VCs tend to focus on different stages of ventures. For instance, some VCs prefer early stage ventures where the risk is great, but so are the potential returns. Conversely, some VCs focus on providing capital to firms to bridge capital gaps before they go public.

Partners: Venture capital firms are comprised of individual partners. These partners make investment decisions and typically take a seat on each portfolio company's Board. Partners tend to invest in what they know, so finding a partner that has past work experience in your industry is very helpful. This relevant experience allows them to more fully understand your venture's value proposition and gives them confidence that they can add value, thus encouraging them to invest.

Portfolio: Just as you should seek venture capital firms whose partners have experience in your industry, the ideal venture capital firm has portfolio companies in your field as well. Portfolio company management, since they are industry experts, often advises VCs as to whether the company in question is worthwhile. In addition, if your venture has potential synergies with a portfolio company, this significantly enhances the VCs interest in your firm.

Assets: Most companies seeking venture capital for the first time will require subsequent rounds of capital. As such, it is helpful if the VC has "deep pockets," that is, enough cash to participate in follow-on rounds. This will save the company significant time and effort in maintaining an adequate cash balance.

Finding the right venture capital firm is absolutely critical to companies seeking venture capital. Success results in the capital required and significant assistance in growing your venture. Conversely, failing to find the right firm often results in raising no capital at all and being unable to grow the venture.

Write Winning Proposals For Venture Capitalists

You need to secure money for your project. You visit venture capitalists to see if you can get that money. A venture capitalist views your project as a pure investment. A venture capitalist has no emotional attachment unlike you. You need to write a proposal that is structured around a venture capitalists needs, not yours. What may interest you may have no relevance to your potential funder. You need a business plan that is 'investor-focused'.

An investor focused business plan contains relevant information about your project. It addresses concerns, questions and should allay fears that any potential venture capitalist may have. It should meet their needs exactly. Venture capitalists exist to make substantial gains. They want to see a good return on investment. By compiling an investor focused business plan, it will be clear to Venture Capitalists that you are focused, prepared and competent.

There are four areas that need to be addressed:

Management Responsibility

Know Your Markets

Know Your Product

Know How Management, Markets and Product Make Money

Management Responsibility

The strength of management assigned to the project can make or break your proposal. Venture Capitalists need reassurance that you can manage their money. They will want to see a demonstrable track record in areas specific to the project you are pitching. The ability of management will be tested so be very prepared.

Know Your Markets

Venture Capitalists will need to see where your income will be coming from. Your company must demonstrate a strong understanding of your customer base and be able to fulfil their needs. Your plan also must address any potential new or growth markets. Illustrate any research you have conducted to emphasise this.

Know Your Product

Venture Capitalists will want to fully understand your product. They will want you to demonstrate how the product that they are funding will attract customers. The information in this section must be extensive and also feature any potential expansions or upgrades that your product will feature. This will show that you have thought about long-term growth.

Know How Management, Markets and Product Make Money

It must be demonstrated that management can create links and paths between customers and product. This element must be very strong as ambiguous information, or an assumed relationship will scare off any potential funder. Create a step-by-step guide of how their money will be processed and how the customers money will be received. This has to be clearly shown.

Tie in these points together and you are already in the top 3% of all venture capital submissions. Good Luck!

Raising Capital For Your Business - How Long Does it Take?

Most companies vastly underestimate the time commitment necessary to successfully complete a financing. In actuality, a company seeking financing needs to budget between 500 to 1000 work-hours to the capital-raising process, spread out over a 6-9 month time period.

The key processes in the capital-raising process include 1) perfecting the business plan, offering memorandum, and other company due diligence materials, 2) developing a comprehensive, targeted prospective investor list, 3) contacting this list and responding to investor due diligence requests, and 4) negotiating the transaction.

Completing the business plan typically requires at least 200 hours of work. This time is dedicated to conducting the market research to validate the opportunity, developing a comprehensive financial model, determining the most effective way to lay out the business strategy, and actually writing and proofing the business plan.

The next step, developing a comprehensive, targeted prospective investor list is also very time consuming. There are thousands of potential investors, each of which has very different tastes regarding the types of ventures that interest them. Some invest by market sector (e.g., healthcare vs. telecommunications), stage (seed stage vs. later stage), geography, or a combination of these. Many hours must be dedicated to determine which investors are the right fit for your venture. This process involves creating a master investor list, visiting each investor's website to view investment criteria and past investments, and determining who is the right contact at the firm.

To see how easily the time adds up, consider that only about 25% of prospective investors who show an initial interest in a transaction actually progress to detailed company due diligence. Only about 10% of this 25% actually progress to a bonafide offer of funds, of which only 25% of these actually result in an investment transaction. So completing a financing transaction requires, on average, contacting approximately 160 pre-qualified prospective investors.

The due diligence process, where investors scrutinize the investment, can also be very time consuming for the company. Investors often request many documents, some of which can be easily retrieved from files (e.g., prior tax returns), while others may take more time to prepare (e.g., additional market analysis, customer lists with past purchases, contact information, etc.). Finally, negotiating a transaction can take a significant amount of time depending upon the complexity of the transaction and number of parties involved.

Too many companies fail to raise capital since they are unaware of the significant time requirements to do so. Those firms who understand these requirements and budget accordingly are the ones most likely to persevere and end up with the capital they need.

The Term Sheet's Role in Raising Venture Capital

Entrepreneurs and companies who are seeking venture capital often negotiate with one or more venture capital firms on a number of important issues. These issues include the amount of capital to be raised, the investment terms, etc. The document which summarizes these terms is known as a "term sheet."

The term sheet is similar to a letter of intent, that is, it is a nonbinding summary of the key points of the transaction. These points are later covered in detail in the Stock Purchase Agreement and related agreements signed at the time of execution of the transaction.

The value of the abbreviated term sheet format is that it speeds up the process of consummating a transaction. Specifically, it allows the parties to agree on the general terms of the transaction rather than having to debate less important details. In addition, because it is not binding, it allows the parties to take their discussions to the next level without the danger of committing too much. Note, however, that some parts of a term sheet may be binding. Typically the binding aspects only refer to confidentiality and disclosure issues.

Venture capital firms, and not the companies seeking capital, typically prepare the term sheet to include the terms under which they are willing to invest their capital. Alternatively, when seeking capital from angel investors, firms typically create their own term sheets for the angels to review. This fact tells a bit about the balance of power in an investment transaction. Venture capital firms are often more sophisticated and have more power than the companies seeking capital. Alternatively, angel investors are typically less sophisticated and have less power, and are more prone to consider the investment terms as laid out by the company seeking capital.

Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction. It is then up to the investor and company to agree upon the details.

Finding a Venture Capital Firm

Many ventures are faced with the challenging task of raising venture capital. The first part of this process is finding the right venture capital firm (VC). While this may seem simple, it isn't. There are thousands of venture capital firms in the United States alone, and going after the wrong ones is one of the most common reasons why companies fail to raise the capital they need.

When seeking a venture capital firm, there are six key variables to consider: location, sector preference, stage preference, partners, portfolio and assets.

Location: most venture capital firms only invest within 100 miles of their office(s). By investing close to home, the firms are able to more actively get involved with and add value to their portfolio companies.

Sector preference: many venture capital firms focus on specific sectors such as healthcare, information technology (IT), wireless technologies, etc. In most cases, even if you have a great company, if you fall outside of the VC's sector preference, they'll pass on the opportunity.

Stage preference: VCs tend to focus on different stages of ventures. For instance, some VCs prefer early stage ventures where the risk is great, but so are the potential returns. Conversely, some VCs focus on providing capital to firms to bridge capital gaps before they go public.

Partners: Venture capital firms are comprised of individual partners. These partners make investment decisions and typically take a seat on each portfolio company's Board. Partners tend to invest in what they know, so finding a partner that has past work experience in your industry is very helpful. This relevant experience allows them to more fully understand your venture's value proposition and gives them confidence that they can add value, thus encouraging them to invest.

Portfolio: Just as you should seek venture capital firms whose partners have experience in your industry, the ideal venture capital firm has portfolio companies in your field as well. Portfolio company management, since they are industry experts, often advises VCs as to whether the company in question is worthwhile. In addition, if your venture has potential synergies with a portfolio company, this significantly enhances the VCs interest in your firm.

Assets: Most companies seeking venture capital for the first time will require subsequent rounds of capital. As such, it is helpful if the VC has "deep pockets," that is, enough cash to participate in follow-on rounds. This will save the company significant time and effort in maintaining an adequate cash balance.

Finding the right venture capital firm is absolutely critical to companies seeking venture capital. Success results in the capital required and significant assistance in growing your venture. Conversely, failing to find the right firm often results in raising no capital at all and being unable to grow the venture.

Raising Capital For Your Business - How Long Does it Take?

Most companies vastly underestimate the time commitment necessary to successfully complete a financing. In actuality, a company seeking financing needs to budget between 500 to 1000 work-hours to the capital-raising process, spread out over a 6-9 month time period.

The key processes in the capital-raising process include 1) perfecting the business plan, offering memorandum, and other company due diligence materials, 2) developing a comprehensive, targeted prospective investor list, 3) contacting this list and responding to investor due diligence requests, and 4) negotiating the transaction.

Completing the business plan typically requires at least 200 hours of work. This time is dedicated to conducting the market research to validate the opportunity, developing a comprehensive financial model, determining the most effective way to lay out the business strategy, and actually writing and proofing the business plan.

The next step, developing a comprehensive, targeted prospective investor list is also very time consuming. There are thousands of potential investors, each of which has very different tastes regarding the types of ventures that interest them. Some invest by market sector (e.g., healthcare vs. telecommunications), stage (seed stage vs. later stage), geography, or a combination of these. Many hours must be dedicated to determine which investors are the right fit for your venture. This process involves creating a master investor list, visiting each investor's website to view investment criteria and past investments, and determining who is the right contact at the firm.

To see how easily the time adds up, consider that only about 25% of prospective investors who show an initial interest in a transaction actually progress to detailed company due diligence. Only about 10% of this 25% actually progress to a bonafide offer of funds, of which only 25% of these actually result in an investment transaction. So completing a financing transaction requires, on average, contacting approximately 160 pre-qualified prospective investors.

The due diligence process, where investors scrutinize the investment, can also be very time consuming for the company. Investors often request many documents, some of which can be easily retrieved from files (e.g., prior tax returns), while others may take more time to prepare (e.g., additional market analysis, customer lists with past purchases, contact information, etc.). Finally, negotiating a transaction can take a significant amount of time depending upon the complexity of the transaction and number of parties involved.

Too many companies fail to raise capital since they are unaware of the significant time requirements to do so. Those firms who understand these requirements and budget accordingly are the ones most likely to persevere and end up with the capital they need.