It can be simultaneously the most stressful and exciting time in your life. You’ve quit your job, you’re moving ahead with your startup idea and you may just have attracted the interest of some venture capitalists. The next steps are critical. How do you convince them to invest in your idea?
Consider Other Sources
An important part of preparing your business plan is understanding what funding approach is appropriate for the company you envision. Many people assume that if they want to build a company, getting the backing of venture capitalists is the only way to go, but this is not the case. Not everyone wants the involvement of venture capitalists. Not all companies have the growth potential that venture capitalists are looking for, but this doesn’t mean your company can’t still be successful. Other potential funding sources include small business loans, family and friends, self-funding, grants, crowdfunding and more. Be sure you fully understand the pros and cons of all the resources available to you before you seek funding.
Be Financially Savvy and Sound
This is about your business, not your personal life, so it might seem unfair that you need to clean up your finances before you can attract investors. The truth is that some venture capitalists may look at many different areas of your life to make sure you are organized and reliable. It can be a good idea to make sure your credit scores are good and you’ve paid down as much debt as you can before you start asking for money. It may not be possible to pay off some debts, such as student loans. However, you may want to consider refinancing them at a lower interest rate, which can help save money in the long run.
Prepare the Pitch
As the saying goes, you never get another chance to make a first impression. If you’ve got a brilliant business idea, you might feel like that will be enough to carry you through your meetings with potential investors. However, the pitch is critical to your success. Think of it as a combination of a job interview and the best storytelling you’ve ever done. Don’t get too distracted by the word pitch either. Venture capitalists aren’t looking for the hard sell. Instead, they want a strong story about you and your business idea that will engage them and want them to be involved.
Get Ready for Questions
You should anticipate being asked a lot of difficult questions. After all, you are asking for a significant investment. One step in preparing is learning as much as possible about the venture capitalists you are pitching to. It’s important to identify the companies that invest in the kind of business you are building. You should also find out at what stage they like to invest in since some prefer to get in early and others want to work with companies that have been operating for a little while. You need to be prepared to answer questions about your management team, your company’s potential for growth, how you plan to address risk and more.