10 Things Venture Capital Investors Look For in Your Company
As you prepare your company for investment, be aware that venture capitalists scrutinize all aspects of your company. You do not have to be strong in all ten aspects in order to be ready for investment, but you should strive to develop each point as your company develops. Pay particular attention to these ten areas:
People: The most important element of your company is the team. Make sure your team is made up of people who can grow your company. Don’t forget that your team consists of more than just the people on your payroll. Advisors, mentors, and board members are part of the team, too.
Partnerships: Aside from the team, your partnerships with other businesses are the next most important thing. Create strategic partnerships with other companies, with the common goal being to increase revenue.
Package: When you sell stock, you are selling a piece of your company. When you pitch your deal to investors, be sure that you’re discussing the whole package and that you aren’t over-focusing on the product.
Plan: When you expect to work with investors, you need to create an extensive plan for your company. You don’t have to follow the plan exactly, but you do need to refer to the plan, change the plan, and iterate your company’s path as you go.
Pro forma: A pro forma is a detailed prediction of revenues and expenditures for your company. When you pitch to investors, you are not selling your product; you are actually selling the prediction of profits — your pro forma.
Product: Although you don’t need to have a finished product to talk with investors, the closer you are to selling your product, the better off you are.
Promotion strategy: To sell your product, you have to connect with the people or companies who will buy it. How will you get your product into the world? Provide specifics.
Paying customers: Customers who pay for your product offer direct proof that you have a viable product. Record the information about your early sales and use it to understand and serve your customer better.
Proof: Proof of future success is impossible to show, but the more risks (or milestones) that you overcome, the more likely you are to convince an venture capital investor that your company has what it takes to succeed.
Pitch deck: You have to communicate your business to investors in a short amount of time, so make sure that your pitch deck (a PowerPoint file with information about your company, product, and deal) contains all the key points and is clear; otherwise, you can lose credibility fast. You really do only get one chance to make a good first impression.