The most successful venture capital businesses are not just good at what they do; they are also lucky. Because you can’t do anything to improve your serendipity, you can plan your business from the beginning in ways that remove hurdles and increase the possibility of success. Follow these suggestions:
Start by thinking about the end. When you look back on this business from the future, what do you want it to look like? Plan for the results that you envision. Look carefully at what your exit options are and how to prepare for your exit.
Target a huge problem that has a huge market. VCs want big exits. The best thing that you can do to set your company up for VC funding is to go after a huge problem with a huge market. You can’t sell a company for billions if it has an esoteric or limited market. Be sure to find out how to position your business to attract a VC’s attention.
Get your feet under you. VCs don’t fund companies with grand ideas until the company shows a lot of progress toward revenue. This progress is often referred to using the word traction. Investigate what key components — business plan, product development, marketing strategies, and more — you need to focus as you prepare your business for venture capital.
Become visible. You can increase the likelihood of getting funded quite a bit by simply meeting the funders. Make friends with investors. Get to know the VCs and the larger start-up community. Schmoozing isn’t a bad word anymore. Look for ways for connecting with investors, both online and face-to-face.
Develop the deal. Not only do you have to develop the company, but you also have to design a great investment deal. Investors like working with founders who know how to put their due diligence materials together and who have working knowledge of a term sheet. These concepts aren’t rocket science, but getting familiar with the process does take time. Get cracking!
Start pitching. After your company has gained traction, your deal is structured, and VCs know your name (or at least your face), you need to start pitching for investment. Pitching is a very important and involved task, so dedicate some time to learning about it.
Delve into more detail on three key points: getting your company ready, designing your investment deal, and approaching investors.