Raising Venture Capital

What’s the Scoop on Venture Capital These Days?

Providing an investor is going to get what he or she feels is a great Rate of Return on Investment (ROI), then an entrepreneur might have a shot at a venture capital (VC) deal.

There are deals to be achieved although the 2010 results show that the VC market tends to run below the prerecession levels.  Three aspects are increasingly important with the first being the expected ROI balanced against risk factors.

Another important aspect VC investors site is the exit strategy.  Private company trends show that IPOs are not the only strategy and in some industries or in the case of government-backed deals, entrepreneurs are looking to alternatives to the standard Wall Street exit.

A third reason to encourage VC investment may be the sector.  The right sector at the right time can make a difference.  Here are some popular 2011 sectors to look forward to 2011 VC.

Internet – The newest ventures are going to be technology crossover ventures.  What is that?  Combinations of technologies and software, social media sites combining digital games and other media, emailing and sales software and technologies, medical and engineering prototype software.

  1. Software Development – VCs crave software deals, mobile applications, electrical grids, analytical software…its all good fodder for investment.
  2. Energy, Green and Ecosystem Deals – Since the economy tanked and taxes are sky high, how can consumers save money on utilities while promoting a healthy world.
  3. Electronics – Who can resist the latest greatest gadget or great TV?  This is where Apple (like the iPad) is a great example.
  4. Medicine and Drugs – Basically, we are all getting older and new generations want to be healthier and live longer.

With your pitch to a VC investor make sure you business plan is iron clad detailed!

Business Plan Tips

A business plan is the blueprint for your company or for the investment you desire.  This blueprint sets forth the mission of your company and determines how the mission will be facilitated and accomplished.  Your business plan is the representation and face of your brand, your company and you.

Here are some frequently asked questions (FAQ) about business plans.

How long should my plan be?  The answer should be “reasonable”, not too long and not too short.  Remember that while you are pitching an investor or firm so are about 1,000 other people.  This means get to the point!  About 25 pages is max and you can attach statements such as, More Information Available on Request.

What is the most important part of the plan?  Although it is all-important, in order for an investor to grasp a Rate of Return and an accurate assumption of risk, you must put it plain terms for the use of the product, the need for the product and quantify the cost of producing the product.

What is more important, the details of the product or the marketing of the product?  Ultimately how the product will be marketed, sold and advertised is how the investor will derive his or her ROI – Return on Investment.  Get it?

How important is the industry sector?  Extremely; you have to help the investor understand the industry so that the decision has the right dynamics.  This perspective sets the tone for the relationship, which of course, you want to be favorable to both you and the investor.

Should I include my business model?  Absolutely, who does what, where does the money go and who makes the decisions; every detail is important!

Should I list my competitors?  If you do not, you will not appear honest and forthcoming. You must list the good with the bad and don’t over embellish the market to make your idea or company look better.  If an investor finds out, it will likely kill the deal.

Who should I attach from my company to the plan?  The executive team and they should be listed in a way to stress their competency and value as key players.

How do I state my funding requirements?  Honestly and simply.  Break it down with a use of proceeds and include the “worst case scenario plan” incase of a rainy day.  If your plan does not cover the “worst case” it likely won’t work.

How accurate should my financial forecast be?  This depends on the state of your company.  If you have past tax returns (you are not a start up) you obviously have to include these activities.  Again make sure the plan prepares for the “worst case.”

What is the best exit strategy?  This is where you have to understand today’s’ economy, business practice and your industry.

One final thought.  If you have met the above requirements, make sure the presentation is not just professional…but top notch!

Small Business Ideas for Saving CASH!

  1. Book your own trips and use the travel sites with the deals.  Try not to wait until the last minute!
  2. Watch the printing.  How much paper gets crumpled up over typos or too many copies?  Too much!
  3. Utilities – Offices may easily implement some of the same rules we ask of our families.  Turn off the lights, or perhaps you want the control, use timers for lights and heat.
  4. The Telephone – there are many ways for small business to save money on communication.  Investigate the alternatives and you might find great savings.
  5. The Coffee Station – It is a wonderful thing for an employer to provide coffee and beverages, but you can save money here.  Try not to start bad wasteful practices like offering bottled water and then realizing it is too expensive.  Get a grip on your offer and the policies from the start (maybe paper cups are too expensive).
  6. Office Holiday Parties – If you aren’t feeling like sponsoring the big event, find alternatives:  cater a lunch, have an after work happy hour instead of dinner or try something fun like the old ice cream social at the afternoon monthly meeting.  Don’t be afraid to be creative.
  7. Recycle – By recycle we don’t mean soda cans, we mean folders and binders.  Try taking a conservative approach to everything replaceable.
  8. Travel to meetings – try the new alternatives with digital conferencing and save for the most important trips.

In these times, most people are going to appreciate your reasonableness toward the policy of conserving cash and keeping your small business stable.  Most employees are grateful for a good environment and won’t mind being conservative with the right atmosphere.

READ:  Production – What Can Go Wrong?