A question I hear often is “how do I find a VC (Venture Capital company) to invest in my company?”
First, there are many different institutional equity investors, both private and public. Venture Capital companies are best known by start ups and early stage companies, because VC’s are most likely to be found investing in these riskier ventures. With the dot.com bubble bursting and the current recession, it is much harder to find the VC we remember from the past decade. The reasons they are harder to find is that many of them have subtly lowered their interest in ventures (vC) or have dropped it all together and now look more like a merchant bank. If you approach one of these “new breed” VC’s, you will find them wanting evidence of an existing, sustainable customer base, revenues and patent office action on all intellectual property. For the legacy VC’s who are still willing to take more risk and keep the capitalize “V” in VC, you will probably find them looking for the following key elements before they’ll take a meeting with the entrepreneur; a solid product idea that is scalable, a prototype or working model of product or service, good chemistry with entrepreneur and or management team, and the entrepreneur and/or management teams who are willing to share in the risk (having skin in the game with their own dollars or willing to take less ownership). Most VC investors state that the value they bring to the company is operating/development capital (money), leadership (in the form of a majority of your board of directors) and contacts to help move the business forward more effectively. They are very good at the first two offerings, but don’t expect them to do the third very well (my experience anyway). Remember, bringing an equity investor into your company is the process of selling large portion of your company to someone who is looking to get at least a 10X multiple on their investment with 3-7 years depending on the opportunity.
What has your experience been with VC's?
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