Ten Ways to Get a No from a Venture Capitalist
By C. Worrall Here are ten ways to get a negative response from a venture capitalist:
Not doing your homework - VCs tend to invest in a specific space and stage; for instance, early stage biotech or growth stage retail. If you do not fit their investing criteria, they will turn you down flat. Sending your business plan in cold - If you have a really great technology and you write extremely well, there is a chance that the plan could make it to a partner's desk eventually; however, more likely it will sit in some pile on an associate's desk until spring cleaning. Find an introduction to the firm.
Saying you have no competition - Everyone has competition, even if it is 'doing nothing.' You will have to convince your customers to spend their money on your products rather than on something else. What is it and how will you over come that resistance? Require that the VC sign a non-disclosure - They just won't do it. If there is some piece of your technology that you need to withhold for patent reasons, explain that in your presentation. You will have to discuss the product to sell it, so you should be able to discuss it to the extent that you can sell it to the VC.
Failing to pick a CEO - Many times a group of friends founds a company and just can't decide who should be in charge. Instead of naming one as a CEO or hiring an outside CEO, they use the nebulous title of co-founder. You are running a company, not a democracy, pick a chief. Failure to segment your market - Saying that you have a $10 billion market is attractive if it is true. But if that market for Linux is $10 billion and you have created a Linux add-on, your market is not the entire $10 billion. Failure to understand cash flow - If you don't understand how your cash flow will work, you will go out of business. VCs know this. Not having a sales strategy - Many early stage companies have very interesting technology, but no real sales strategy. The VCs are investing because they want to make money, which means you will have to make money, which means you will have to sell something. Make sure you know how you will be doing so. Don't provide follow up information - If a venture capitalist asks you to send follow up information, don't ignore the request. He or she is not asking for this information for health reasons. Have a crappy plan - You can have a weak idea, but with the right plan and good execution, you can make a lot of money. Who would have thought that selling a $3 cup of coffee is a good idea? But if you have the greatest technology in the world and no decent strategy to develop it and sell it, you will have a hard time raising money from a VC.
Ms. Worrall is the President of Worrall Consulting, LLC. Worrall Consulting is a finance and business strategy consultancy providing professional services to high growth, early stage companies. The company provides capital formation assistance, market research and business intelligence, and business planning strategy. More information about the company can be found at http://www.worrallconsulting.com . Additional financial and strategy advice can be found at http://www.cfoyourself.com Article Source: Ten Ways to Get a No from a Venture Capitalist