How to use a VC?
First step to obtaining venture capital? Sit in front of some Venture Capitalists! General aspects to consider when looking for a venture capital firm. VCs have the luxury of investing only in well-prepared companies.
The first step in finding venture capital is to do an intelligent presentation of your idea/start-up to the venture capital firm you are interested in a meeting.
Risk capitalists rely heavily on trusted connections for business, so we do not recommend approaching a VC on their own. Rather, the reader is invited to rely on institutions and institutions responsible for this type of activity. For example, Italia Start Up is an established and operational company in Italy, also known institutionally for its activity supporting start-ups, and also offers the possibility to connect these with safe Italian venture capital funds. In short, a credible reference for both the start-up and the VC.
In addition, you don’t have to waste time trying to contact as many people or websites as possible. It is better to find venture capital companies that are the best solution for the specific startup business. The more the startup is closely aligned and the founder lives up to the needs of the venture capital firm, the more likely it is to find venture capital firms willing to finance.
The first approach with the VC is crucial, a wrong presentation could permanently inhibit any chance of success of the deal.
The pitch for a Venture Capital company
The first thing the founder of a start-up has to send to investors is an elevator pitch: a pitch, a sales presentation.
It is a document containing a short and well-defined explanation of the problem that the startup solves, how it does it and how big the market is for that solution.
It is not necessary to “sell” materially. The opportunity that emerges in the elevator pitch must be worth enough to speak for itself.
A pitch deck is essentially a business plan or executive summary divided into 10-20 slides in a PowerPoint document.
The pitch deck is the friend and most trusted ally of the entrepreneur in the process of “hiring” an investor. The deck is the simple, visually impactful presentation, at the same time analytical and precise of the idea, the company, the business and its projection.
It is the main document for getting meetings, it will be the focal point of the meetings themselves and what investors will examine after the meetings.
Il pitch meeting.
Once the investor has reviewed the presentation materials and established an interest in meeting the start-up’s founder, the next step is to arrange a moment for a launch meeting, generally at a given time investor.
In some cases, especially with investments in the initial phase, the presentation meeting is more of a time to know and evaluate the seriousness of the person of the founder as well as, of course, listen to the presentation of the pitch. At this stage, the way you approach is fundamental: investors will invest more often in an entrepreneur they prefer even if with an idea they have reservations about, compared to an idea they like presented by an entrepreneur who they think is an idiot .
During the meeting, the entrepreneur will answer the questions that will arise by addressing the points of the deck. Note.:
The goal is not to get to the end of the pitch deck in 60 minutes or less.
The goal should be to find an aspect of the business that the investor actually cares about and focus on that point. If the investor wants to spend 60 minutes talking about the first slide, don’t rush to move on.
The Business Plan.
The business plan is important in terms of business planning that emerges from the document.
Every question posed by the investor on the business plan is of the highest importance to the outcome of the investment transaction.
Formulating such a complex document requires a strong capacity for financial analysis. It is recommended that qualified staff or agencies, professionals in charge of the training.
The Financial Plan.
The Financial Plan is the company’s financial planning document. In many cases it is part of the Business Plan, but it is recommended to be drafted in an ad hoc document of financial reporting including income statement, balance sheet, budget preparation (usually within 5 years), allocation of resources, forecast every other interaction of the company’s expenditure and revenue in the reporting period.
Of all the documents that are presented to the investor, the financial data-sheet is the most important.
Most venture capital firms provide for a reasonable four-year projection of the company’s revenue and expenses. These companies are interested in knowing where and how their capital will be used and how quickly the start-up will be able to balance the business.
Again, for the preparation of this document, it is recommended that it is drafted by experienced and qualified staff.
The last phase of VC analysis and screening is a kind of catch-all that we will call “due diligence”.
When the Venture Capital company really becomes interested in an agreement, the next stage of due diligence is realized in an in-depth analysis of all aspects of the business, from financial data to the details of how the business model works.
This is where all the research and support that the entrepreneur has put together for his start-up will be put to the test.
At this stage it is possible that the start-up may be asked to connect its first customers with the Venture Capital company in order to ensure that everything that has been said is actually verified, as well as to assess commercial behavior company with customers.
Since Venture Capital tends to invest larger dollar amounts in fewer companies, this basic research is very important. Many venture capital firms have had previous investment experiences, often as equity research analysts; others have a Master in Business Administration (MBA). Venture capital professionals also tend to focus in a particular sector. A venture capitalist specializing in health care, for example, may have had previous experience as a health analyst.
Once due diligence is completed, the company or investor will commit to a capital investment in exchange for shares in the company. These funds can all be provided at once, but more typically the capital is provided in rounds. The company or investor then takes an active role in the financed company, advising and monitoring its progress before releasing additional funds.
The investor leaves the company after a period of time, typically four to six years after the initial investment, initiating an initial merger, acquisition or public offering.
In conclusion, start-ups formed or constituent and small businesses, in a difficult and often unfavorable economic reality towards them, to launch and develop their business can take advantage of the financing opportunities proposed by VCs. This advantage is nothing more than a full-fledged corporate maneuver, with all the pros and cons of the case, but certainly a great opportunity.
C.I.LP. Italia, thanks to its network of professionals, companies and specific partners is able to support companies or anyone who has a business idea in the realization of the necessary documents and in the presentation phase to VCs.
Editing by CILP ITALIA NEWS