Venture Capital Firms Invest in the Deal…and the People

Venture capital investors were the silent partners in building several of the best-known companies in the world – including Apple, the #1 ranked global brand.Exam and quiz

Venture capitalists are private investors who seek new deals. Many companies are start-ups in the technology and biotech sectors that promise a high rate of return. If you’re seeking venture funding, you’ll be required to present your company’s vision for the future.

Are You Likeable?

It’s an axiom in the venture capital business that the individual is as important as the deal. According to a very successful venture capitalist, “Bank debt is by the numbers. But many venture capitalists would rather invest in a good team than a good product. It’s a very intimate relationship. You have to work together for a long time.”

There is a close relationship between the entrepreneur and the venture capitalist, so how you present yourself is the key to capturing their attention and their investment.

You’ve got to demonstrate that you have integrity and have a passion for your company and the drive to make it a success – with the VC’s help.

One VC told us that many of the entrepreneurs who present to his company show up with very long PowerPoint presentations. He feels the impact their presentations is inverse to the number of slides they use. They start by talking about the space they’re in and their credentials. They go into excruciating detail about how the product is made.

That’s not what investors want to hear. Instead, lead with how your product/service solves a problem or why it’s a new innovation. Get them excited by the expected outcome, and not how you’re going to get there.

You don’t always need to use a PowerPoint presentation. Ask the VC in advance how his team would like you to present your deal. One investor said he’d prefer to read two pages with the relevant key facts.

Lead With Your Big Idea

He gave a hypothetical example, an amalgam of many such presentations he had sat through. Growing businessTwo very accomplished doctors from a teaching hospital were working on a research project funded by the National Cancer Institute.

Typical of scientists, they introduced themselves, described their credentials at length and how well recognized they are in their world. Then they started describing the science of oncology research and the clinical trials they had conducted.

They finally got to the punch line: they had found a potential cure for ovarian cancer. That’s what they should have led with to grab the investor’s attention.

Ask yourself, what is the overarching big idea, the key message that could swing the deal? What will get them to say “yes.”

Do Your Research

You won’t get a VC excited if your deal isn’t for them. Research VC companies and the kinds of companies they invest in. You can find them in online directories.

Once you’ve identified potential firms, go to their websites and read the bios of the principals. That will tell you what industries they’re interested in and the flavor of their investments. Learn as much as you can about your potential benefactor.

The former CEO of a major company told us that contrary to what many people think, venture capitalists and private equity firms don’t want to replace the key principals, unless they have to.

When asking for money, can you sell a picture of the future and believe in that future? It’s a two-way street, he said. You’re selling your company, but if you have a great deal, investors are selling themselves, too.

It’s truly like a marriage. You have to get to know each other and live with each other until it’s time to take the company public.

That will be the topic for our next post: how to present a company during an IPO, when the venture capitalists earn a handsome return on their investment from other individual and institutional investors.

Let us know in the comment box if you have any questions about presenting to venture capitalists or what you’d like to know about presenting at an IPO road show.


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