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VC Insider's Guide
How to prepare for a meeting
There a number of different ways that an enterprneur can prepare for a meeting with a venture capital fund manager and give a better opinion for him or herself. First of all, try memorise all key facts figures and other knowledge in order to be rehearsed; remember that venture capitalis are often pressed for time. Have a thorough knowledge of your product and its market in order to be able to demonstrate why you will be able to beat competition. Stressing out the management team and its abilities is a good way towards that direction. Mention potential risks, in order to prove that you have the ability to pinpoint problems and deal with them successfully. Indicate how the investor would be able to cash out from the investment. Remember, a fund’s ultimate goal is to exit the investment with the desired return met. Try to be well groomed for the presentation and use professional brochures. Finally let the investor know that you are approaching other investors as well. These are not more than a few of the things that you should keep in mind before going into the meeting with a venture capitalist.
What to expect from the VC firm
First and foremost, the venture capitalist wants to see a firm that can become highly profitable and dominate the market, meaning that within 4 to 7 years it can go public or merge with a high price/ earnings muliplr. It is the people who will do that hence demonstration of a solid management team with a dynamic leader is laso very important. Then, the VC firm, will focus on the product or service presented before them. It is a no brainer that a good or service that provides high value is sought. It would be very appealing if this product was in an environment (market) that was growing steadily and at a high pace, and with limited completion to block its development. Finally, the ability to achieve positive cash flow and break even sales. These are again only some of the aspects that venture capital firms are looking for. There are a lot more information that you should take care of in order to create a positive image.
Typical information regarding negotiations
Despite common belief, everything can be negotiable when reaching a deal. Among the basic items that are being negotiable are the following: the basic valuation of the company. In other words, how much money will the investor put in for what stake? The type of investment that will be made; will it be stock or debt and so forth. Then a very important part of the negotiations regards the management team; will it remain as is or will it change depending on the investors’ points of view? If so how many sits will be granted to the investor in board of directors? We hope that we can provide a basic frame of the environment during the negotiations with a venture capital firm.
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<April 2019>