It’s a fact: most businesses get rejected before securing the venture capital they need. Venture capitalists have a preference for industries that have the potential for rapid growth. Businesses that don’t offer the same scalability that a software business has are often set aside for ones that do.
If, however, you’re in an industry that attracts venture capitalists, there is still a large chance of being rejected if your pitch doesn’t cut it. Out of the thousands of owners who submit business plans each year, only a small percentage land actual meetings with panelists. Here’s how to keep your prospects interested throughout the screening process, starting with the most crucial parts of your paper pitch.
- Executive Summary
An executive summary allows you to explain the entirety of your business plan in two pages or less. Simplicity and brevity will earn you points in a panelist’s book because they need to learn as much as they can from a single glance. Instead of using embellishments to make your pitch sound smart, think about writing for an audience who doesn’t know anything about your business. If you can sell your summary to your grandmother, you’ll know your points are clear enough.
- Value Proposition
Venture capitalists drool over the next big thing—which explains why they’ve built an avid interest in engineering and design. They want to know they’re investing in ideas that can’t be easily replicated, or ones that fill a significant void in the market. If you want to emphasize your concept’s ability to make money, be ready to show traction through the number and quality of your early customers.
- Smart Financials
It’s rare for businesses who are purely at the startup stage to get venture capital. Most panelists want to see momentum behind a business before they start investing in it. Having a history of generating your own revenue makes your business more attractive because you can offer solid insights behind an upward financial projection.
Venture capitalists won’t expect you to be huge. That’s why you need capital. They just need to understand why your business has the potential for growth and how they can get returns on their investment from it.
- Team Members
Panelists see this as “betting on the jockey over the horse.” Competent leaders know how to turn a small idea into a successful business, while inexperienced ones can fumble despite working with a brilliant concept. If you craft your team introduction wisely, you can establish enough direction and charisma before getting the chance to even meet your panel. Venture capitalists will be looking for seasoned professionals or advisors on your team, especially ones they have previously worked with.
Preparing for the Rest
Once you get past the paper pitch, everything else relies on your readiness for presentation, valuation and recommendation. Prepare to answer every question your panel throws at you. If you can’t recite your business plan by heart, you can forget about your pitch being successful altogether. Interested panelists will also want to get to know your business worth by doing due diligence. Make sure you have knowledge about your bottom line and other financials on hand to keep from dragging out this process.
Lastly, be prepared to accommodate some recommendations they might have for your business. No panelist wants to work with a business owner who isn’t flexible and who doesn’t appreciate the value of an outside perspective. Learning how to balance what’s non-negotiable and what needs compromise is a skill that many venture capitalists will appreciate.
Attracting the attention of venture capitalists always comes down to persuasiveness and numbers. For additional assistance in preparing your financials, you can book a free session with our virtual CFOs.