Venture Capital is a form of financing that offers funds to early-stage, emerging startups with high growth potential, in exchange for equity, or an ownership stake. Venture capitalists or VCs take the risk of investing in small and startup companies, with the hope that they will earn a significant return when the companies become a success.
So, here are the steps to get funding from venture capital
Get a proper understanding of early-stage Venture Capital
Venture Capital or VCs firms invest in the companies in exchange for equity in the business, with hopes of seeing a positive return on their investment. Private and institutional investors are the main source of Venture Capital money. Typically, these venture Capital investments are long term partnerships between venture capital firms and companies.
Work on determining if your company is ready to pursue VC financing
The right moment to approach Venture Capital for investment is different for each and every company. It is possible to attract a Venture Capital Partner with only an idea, but the majority of deals are closed after a business has three concrete things:
- A founding Partner
- A Minimum Viable Product (MVP)
Venture Capital is geared toward companies that are highly designed to grow quickly and have high startup costs. For the best chance of scoring venture capital funding, you need a disruptive idea – ideally in an industry where the VCs tend to invest, heavily like technology, and an impressive and strong management team.
Build a proper pitch deck and presentation
If you are hoping to secure money from a Venture Capital, then you need a solid pitch deck that will be your calling card and the starting point of most introductory meetings.
A pitch deck is a presentation that showcased an overview of your business. The deck can share some of the useful insights about your product or service, business model, company funding needs, market opportunity, and your management team as well.
Furthermore, a pitch deck should be concise, short, and cover the following elements:
- Management Team
- Company Progress
- Company Financials
- Company Progress
- Market Pain Point with solution
Find the right VC to fund your business
All the Venture Capital firms have a specific focus regarding the types of companies they fund: They might invest mainly in consumer products, software, financial technology, green technologies, AI, or any other category of business. And each firm focuses on different stages of investment, which includes the Seed, Early Stage, Series A, Series B, and others. Moreover, the first step in reaching out to VCs is proper research.
Once you have got a target list of Venture Capital to approach, then it is the time to set up meetings. You have just two opportunities to make connections: an intro from someone in your network or a proper cold email to a VC partner.
Master the VC term sheet
A term sheet as “a non-binding listing of preliminary terms for venture capital financing,” as per the dictionary. According to the report, it refers to as the “first real piece of paper a founder sees from a VC when they decide that they’re interested in investing.”
There are three main sections of a terms sheet:
- The funding section lays out the financial rules and guidelines of the proposed investment. It mainly outlines that how much money the VC firm is offering to invest and what it wants from your company in return.
- The main purpose of the corporate governance section is to define the distribution of power between investors and founders as it relates to company decisions.
- The liquidation and exit section describes what will happen to investors and shareholders if your company is liquidated, sold, or dissolved. It defines who gets paid first and highlights any particular preference given to investors.
Complete due diligence, and close the deal
As a founder, you can increase your chances of closing a deal with the Venture Capital, by preparing well for due diligence or the processes by which investors “gather necessary information” on the potential risks which are involved in an investment. You can also get familiar with the reasons that deals often go awry and take proactive steps to encourage a close.
The final stage of a VC funding deal is the time to find alignment across your internal teams, the Venture Capital firm, and your legal advisors. At this time, most of the founders should quickly follow through commitments to investors and provide accurate information about their companies.