How to Get Venture Funding, page 6

Who Should Seek VC Funding?, continued

Most important, VCs expect an “exit” strategy. A successful venture for a VC is one that makes money for them relatively quickly. The VC has to be able to cash out, meaning its equity in your business has to be salable. For the equity to be salable, usually your company has to be sold or taken public via an IPO. Because the IPO window currently is shut and no one knows when it will open again, you shouldn’t be talking to VCs unless you are prepared to sell your business.

The VC Process

In a textbook example of the VC process, an entrepreneur with an idea comes to the VC. It’s best if our hypothetical entrepreneur has a successful track record. In addition, the entrepreneur should have worked with the VC before or at least been introduced by someone the VC trusts.

The entrepreneur will have lined up key members of the executive team. These team members need not already be employees, but they should at least have agreed to join provided the entrepreneur gets funding.

Knowing what’s required, and what to expect, the entrepreneur has prepared materials as outlined later in this briefing.

When the entrepreneur meets with the VC, it’s usually in a comfortable conference room around a blond wood table, with nice art on the walls, in an office building on Sand Hill Road (or, at least, in or near Palo Alto).

The entrepreneur will be expected to give a PowerPoint slide show to a group of partners and associates. They should be considered a “take no prisoners” audience who will interrupt and drill down until they are satisfied. (The entrepreneur should bring a laptop with the PowerPoint. While most VCs will have conference rooms set up for projection, it’s also not a bad idea to bring your own projector.)

If a partner likes what he or she hears, and the idea fits in with the VCs portfolio, he or she will present it to the other general partners at the next partners meeting. Generally, if a partner feels strongly about an idea, the firm will move forward on it, with the provisos that this is not absolute, and that no one partner can sponsor too many ideas.

Continued next page

TOC || Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | More