Every entrepreneur dreams of getting venture capital loans for their startup.
Apart from bringing in the big bucks, venture capital provides strategic assistance, expertise, the know-how of the market and much more. Yet, as anyone with a remote knowledge of market could tell, getting venture capital financings isn’t easy.
Hence the reason why we came up with this article.
Tips for Securing Startup Business Loans through Venture Capital
Following are the tips using which you can get a startup business loan via venture capital.
1. Prepare a Business Plan
Perhaps the most important part when trying to get VC funding, you need to have a business plan as detailed as possible. Apart from assessing all the factors which are essential to your business, it should categorize each stage of your business based on its financial outlay.
Next, and once you’ve prepared a business plan, accompany it with a Mission Statement – which is a concise outline indicating the purpose of your business, goals it wants to achieve and execution mechanism as to how those goals will be achieved.
Finally, you should remember that when it comes to VCs, they always prefer specialists over generalists. Therefore, both the business plan as well as mission statement should revolve around the unique-selling-point of your business. Only then could it attract the attention of an investor.
2. Do the research
To identify the VC firm which is more likely to invest in your startup, ask these questions first:
- Will it invest the amount your startup needs?
- Does it have a history of investing in your industry?
- Has it ever invested in a company which is at your stage of development?
- Is the fund viable? The best way to answer this question is to look at its investment history. If the fund hasn’t made any investment in the last few months, it might be in trouble.
Remember, each Venture Capital firm has its own personality, identify and interests. It has a preference about where it’d invest, what amount and at what stage. Fortunately, you don’t need to dig deep to find all of this – a mere visit to the VC’s website should be enough.
Provided you do this research, you’ll automatically eliminate those VC firms from your search which aren’t likely to invest in your startup. Consequently, you’d save time which you can then better invest to try and target more suitable firms.
3. Avoid the lure of bulk
At the cost of sounding hyperbolical, email templates are akin to plague. The more you spread them, the more destruction they will cause to your business.
How? Any serious investor with a million things to do never reads an email when it reads like it is sent to multiple investors at once. Even if you send it to one person per email, the lack of specialty makes it crystal clear to the investors that you’re trying to kill many birds with one stone.
Similar is the case with a business pitch. Venture investors don’t only look at business ideas, they also look for what’s in it for them. And the only way you could answer this question to their satisfaction is to research the venture capitalist whose capital you’re courting. In other words, be specific.
4. Gain the trust of VCs
Assuming that you’ve found the VC who is taking interest in your startup, the next step is to get out of them a promise for investment. It is helpful if you concentrate on the following things when pitching your business idea to the VC.
First, make sure that you include the details of all the major stakeholders in your venture. VCs are more interested in projects where the stakeholders have proven experience in the same field. In this way, they can be sure that their investment would likely yield a favorable return.
Second, to strengthen your case, try to get referrals. It is basic human psyche that we trust those people more who are given a thumbs up by people that we trust. Try to get a favorable word for you in the ear of the VC through consultants or angel investors who are well connected in the field.
5. Strike the deal
As has become the norm these days, most VCs are reluctant to commit the whole amount at the outset for the want of assurances that their investment would be safe.
You can solve their problem by inviting them to invest in a beta project at first. If the returns prove to be satisfactory, they could then commit the whole amount.
This advice from your side will let the VC know that you’re confident about your business’s chances, which is never a bad thing. Conversely, if you refuse to do beta testing, that might be construed as a sign that you aren’t too confident of your business’s chances.