Are you a startup looking for sources of capital from venture capital investors like Clean Venture Fund? You should know that these financing methods aren’t easy to close or obtain. Entrepreneurs should prepare for the initial meeting and understand the complete process and any issues that may come in.
With that said, what do you need to prepare for? I’ll be showing you a list of what venture capital investors want and how the process would go.
The Requirements for Venture Capital Financing
The most important thing a firm will need is a winning business plan. This is the initial and one of the major pieces of information venture capitalists would review. If the business plan won’t compel them to take any action, then expect rejection.
If you have a flawless business plan that investors would want to look further into, what else is needed? The answer would vary, depending on the firm, but most investors would want to see these:
- Large market size
- Proprietary intellectual property
- Scalable business models
- The potential to exit the business for at least $50 million in 5 years
- Management team members that have excellent experience and expertise
- Current valuation that provides a promising return of investment
The final challenging when securing financing is to identify to suitable firm for your business. A venture capital firm will determine if your business is worth investing based on the firm’s:
- Sector and stage preferences
- Partner backgrounds
- The total assets the firm holds
- Other portfolio companies they have
This is why you need to do the research before even securing the requirements a venture capitalist firm wants to see. This is so you aren’t wasting your time on firms that aren’t interested in your industry or financing stage, and that you focus more of your efforts on firms that are willing to invest in your specific business.
Does Your Business Require Venture Capital?
Before you get into collecting venture capital, does your business need it?
Venture capital does have its disadvantages, besides the amount of preparation it would take.
Investors would take a part of your company, so you have less control over the decision making. This means that your company may have conflicting ideas on how to run the business, and even risk the business merging with another company, or through an IPO.
If you would like to retain control of your business and do not want a liquidity event for investors to recoup their money, this financing method may not be for you.
That said, venture capital does have its advantages as well, as it provides your business the needed funds to grow. It will also give entrepreneurs more resources, and not just financially. Investors will give entrepreneurs opportunities to create a network of connections and provide their expertise to keep the business running.
Wrapping It Up
It is challenging to raise venture capital, but with research and a lot of preparation, it can be done. If you are keen in raising venture capital, do consider these basic requirements and sell your business as an amazing investment opportunities investors can’t say no to. Good luck!