Get VCs to part with their money

BUDDING entrepreneurs may have several questions relating to the big F: funding.

For starters, get the basics right on how to woo a venture capitalist.

How important is a good presentation of an idea apart from having a good idea? How should I prepare before presenting my idea to a Venture Capitalist?
- Samir Jain, Bangalore

The presentation is a very important aspect of selling anything, including a good idea, to anyone, including a VC. It’s extremely important to be able to clearly articulate the value proposition of your company without getting lost in management and technical jargon.

In VC presentations you are unlikely to get more than 30 to 40 minutes in the first meeting to make your case. DON’T go with 50 slides — VCs have short attention spans! What this means is that you have to make an impression in the first short meeting. This can only happen if you have a crystal clear understanding of the market, the opportunities, and the value proposition.

If you cannot explain what your company is all about in a few short crisp sentences, you’ve lost the attention of the VC. This also means that you should be a great communicator. Practice!

Ideally, you should have no more than 20 slides (including the cover and ‘thank you’ slides) to cover the team, market, offering, value proposition, revenue model, and financial plan. If there’s an interest, you can share more information or use back-up slides to respond to questions.

You should demonstrate focus in your idea and in your execution plan. Practice with a few “friendly” VCs. The way to identify such friendly VCs is through networking and reference checks. Talk to entrepreneurs who you know, advisors, angels , industry groups such as TiE and Nasscom, attend entrepreneurial events etc to get connected and then over time build a relationship with them before approaching them.

Take inputs from the advisory board. What’s this? Well, it is important to consider setting up an Advisory Board one that has senior, experienced people from the relevant industry who can help you with strategy, hiring, customer contacts, governance, financing etc.

Talk to experts, those who are from the industry and those who’ve “been there, done that”. Research the industry and market in which you wish to play. Find the names of the folks you wish to connect with and then you try and reach out through multiple avenues as in the case of reaching out to VCs. This could be critical!

There is no shortcut. There is also no magic formula. The key is preparation and in knowing your market, the offering and in communicating the essence of the value in a crisp and clear manner.

How do I reach out to VCs?
- Mary Joseph, Chennai
Once the specifics have been thought through in detail, then you need to reach out to VCs. But how does one reach a VC?

As usual, there are good ways and bad ways. A bad way is an approach that shows you are ill-prepared or that you have not researched the background of the VC adequately as indicated earlier in this article.

As you’ve probably guessed by now, sending in a well-researched business plan consequent to a referral is a good way. A VC receives many plans from various sources. So, to get any attention, a referral is probably the best way.

A referral also implies that some kind of quality check has been done. So how does one get a referral? One way is to use the good offices of the Advisory Board (a group of people with relevant industry experience and expertise who can be a sounding board, help in hiring, strategy, customer connections, etc. They also provide air cover of credibility to a young start-up) or some other trusted intermediary.

In cases where a cold contact just has to be done, the Executive Summary should be sent in, first. This is a two to three page document that captures the profiles of the key team members, the market need or opportunity , the uniqueness of the offering , the business model, revenue projections, and some info on how much money is being sought and for what purpose.

This should be a well-written, professional and crisp document. If this is of interest, the VC will probably call you for a meeting. Go well prepared for the discussion. As the old saying goes, “you won’t get a second chance to make a first impression”!

Approaching a VC should be the job of the CEO. The CEO makes the elevator pitch, the main presentations and answers all the key questions about the company, the market, the positioning of the company, the road-map etc.

It is a good idea to meet the VCs with the key team members in tow as it gives the VC a good perspective of the dynamics and competencies in the management team. Make sure the team members are well prepared. For example, the marketing person should be able to answer questions about the market, positioning, customer/prospects, pricing etc.

Author: Sanjay Anandraman
Source: Wealth, MoneyControl