Capital raising is an important chapter in almost every entrepreneur’s life. To turn the dream business idea into reality, entrepreneurs try out various tools to raise capital for their startups although the capital raised is often not enough to support complete growth and expansion. This results in the need for further rounds of financing. However, Venture capital is one such source which can provide the entrepreneurs with the maximum amount of capital though raising venture capital is the toughest job for the entrepreneurs. There are many things that the entrepreneurs need to take care of while venture capital raising and these are nothing but the fundamental tools to raise capital. The first and the most important thing is, to decide what you want and how much you want.
A proper business valuation makes the task much easier for the entrepreneurs and also gives their business the much-needed credibility. The next most important thing is to find a suitable investor or venture capitalist. Not all investor have the same preference for sector and stage of investment, so it is very essential for entrepreneurs to identify the right investor. The best thing would be to explore the investors’ websites and gather information about their sector and stage preference. The investors usually prefer to invest in a sector which they are well aware of as this minimizes the risk associated with the investment.
The first pitch is very important and often determines the destiny for the entrepreneur. The first pitch should be formal and crisp and it should aim at creating air of mystery so as to make the investors cling to the deal. It should not be too narrative as there are chances the investors might get bored and decide to move back. The entrepreneurs should try to make the deal sound lucrative.
The fundamental things that any investor would like to see is a unique business plan, a sizable and scalable market, a strong value proposition, an innovative business model and a smart and hardworking management team. In the absence of any of these tools, no entrepreneur should dare to spend time in venture capital raising. Once the entrepreneurs succeed in finding an investor, they should always try to keep the business operations transparent for the investors so that they can get idea where and how the money is getting utilized. This helps in building trust and encourages the investors for further financing.
Venture capital raising is the toughest of all other capital raising methods as these professional investors are very choosy in selecting a venture for investment. If they listen to say 100 ventures, they might end up selecting only 2 or 3 at best and provide them with capital and many value-added services like guidance, knowledge sharing, building contacts, exit facilities, etc.
Although it quite a challenging task but at the end of the day, it is worth it as there are no other investors who can provide the newly-started ventures with as much capital as the VCs do. So, it is all up to the entrepreneurs to maintain the right attitude and approach the right investor at the right time.
For more information for tools to raise capital, feel free to visit http://mergeralpha.com/