Business Startups: How to Pitch Your Idea to a Venture Capitalist
For many new entrepreneurs looking to fund their new business, a venture capitalist is the way to go. A venture capitalist is an investor who provides funding for small businesses that do not have opportunities for public funding. If they choose the right business, these investors can stand to gain a massive return on their investment.
However, there is always the chance that a business may fail, and the venture capitalist will lose money. Because of this huge risk, venture capitalists are often picky about which businesses they back. In order to get venture capitalists to get behind you, you need to have a killer pitch. Here is how to effectively pitch your idea to a venture capitalist to help you stand out and get approved for funding.
Determine if your business is a good fit.
Most venture firms are more likely to get behind a business that is similar to their core business. Not only do they have vested interest in the industry, they understand the business much more than any other business. Look for venture capitalists whose area of expertise is the industry you are trying to get into to help increase your chances of them accepting your pitch.
Make contact in a professional manner.
Simply walking in or sending an email rarely get you the positive attention you are looking for. If you have a connection with a venture capitalist, ask for an introduction. If you don’t have a connection, reach out to the venture capitalist using a networking tool like LinkedIn.Other good ways to initially approach a venture capitalist could be through Facebook or Twitter, IM or Skype.
Bring a prototype.
If your business will be selling a product, having a working prototype to show the investor can greatly increase your chances of getting funded. If you don’t have an actual product, bring any plans and drawings you may have. You should come prepared and know everything about your product. Beyond your short pitch speech, you should be ready to answer any questions regarding your product that the investor may throw out at you.
Have an executive summary.
Besides your product pitch, you should also come prepared with an executive summary about your business. Come up with a concise, yet clear, summary on what your business is about. Your speech needs to portray confidence. If you are not sure about your business, how can you expect a venture capitalist to be confident in backing it?
Know your financial plan.
Lastly, you want to talk about what their funds will be spent on. When the funds run out, where do you see your business? Do you see your business having enough success to raise more funds? Where do you see your business in 5 years? Will it be expanding? Investors are interested in seeing what your plans are for your business.
Dealing with so much money, it’s not hard to see why venture capitalists want to see as much relevant information as possible. Coming prepared with a good pitch can increase your chances of getting funding. Start by looking for an investor that has similar interests, approaching them in a professional manner and then bringing enough information about your product and business to prove you have a sound plan. If you are small business and need legal advice about getting funding for your business, contact our Phoenix business lawyers today.
Written By Brad Denton
Gunderson, Denton & Peterson, P.C.
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