How long should you expect the process until deal closure to take?
at least 6 months
Phases until deal closure
Contact phase
Contacting a VC directly or via a mediator regarding an investment
Contact is best made using a short paper describing the venture
Rough analysis phase
Venture Capitalist makes a preliminary decision on whether to follow up on the contract or not
Up to 90% of investment porposals fail at this stage
Detailed analysis phase
Business plan is checked in detail (due diligence)
Several meetings between Venture Capitalist and the entrepreneurs usually take place in this phase
Negotiation phase
Final negotiations about all details of the contract
Negotiations may take place over a period of several months
What does the selection of a potential investment partner depend on?
Depends on the investment phase
Criteria do decide if a venture is in the right situation to seek institutional VC funding
Name and reputation of the VC: VCs have different reputation, which reflects on the young company or influences future financing rounds
Development phase of the company: Different VCs finance different development phases of young companies
Industry sector of firm and VC: VCs sometimes have a specilization on a certain industry sector
Required financing volume: Different VCs invest different amounts
Location of the VC: If the company cannot be reached within two hours, the probability of an investment is not high
General guidelines when selecting a potential VC
Listen to your instinct
Negotiate from a position of strength
Find shared beliefs
Pay more attention to the partnership than the terms
Steps to increase your chances of VC funding
Take a proper approach
Make it to the next meeting, be precise, be memorable, don’t forget to ask for money
Avoid mistakes and pay attention to detail
Look for “warm” intros: leverage your network and try to identofy the VC’s preferred channel
Be aware of who your primary contact at a VC is: Analyst vs. Partner?
Think parallel: Don’t just approach on at a time
One team member driving the process: Have the proper go-to-guy
Make it to the next meeting, be precise, be memorable, don’t forget to ask for money!
30 second pitch:
What does your company do?
What problem do you solve?
How big is the market?
How much traction do you already have?
3 Minute pitch:
provide unique insight
Explain how you (plan to) make money
Sell your team
Be specific about desired funding
Additional details go to the appendix
Introduction: Make sure the listener understands what you’re doing
Progress: Show it and know your numbers
Market size: Ideally build bottom up analysis
Insights: The investor should learn something that is counter-intuitive
Team: Your team should be uniquely suited for this business
Asking for money: Drive the conversation towards a conclusion - but don’t make the claim that you won’t need future funding after this round
Introductions to other founders they have backed: Maybe the best source of information on how the VC will act once they are invested
Last changed9 months ago