My 10 top tips for entrepreneurs looking for venture capital #2

Here is the following of last week’s list of top tips for entrepreneurs looking for venture capital. The rest will follow in a final post later this week.

Don’t hesitate to let me know if you agree, disagree or have any questions in the comments!

The first three tips were:

1. Do your homework first
2. Don’t just turn up with “a great idea”
3. Keep your first presentation short

Now for the next tips:

 

4. Ask for more money than you think you need

If you’re going to find investment, you have (well, I hope you have!) asserted how much money you need to raise to fund your plans.
When pitching to a VC, you should always ask for more money than what your calculations call for. You need to include some head room, as the best laid plans are always plans, and more than often, unexpected expenses turn up.

You are more likely to secure funding if you have built in headroom in what you’re asking, investors will be more confident in your ability to be a good partner if you prove that you understand risk management. I have heard that straight from the mouth of the partners of venture capital firms, who were very happy to see that we did build a 20-30% extra in what we thought needed to fund our plans.

5. Investors don’t just invest in future plans, they invest in people.

Investors want to know about your business, about your plans, but they first of all invest in people, and only then in your business plan.

Plans are just, well… plans. They will change and evolve with time, and that’s normal!

Most investors want to help fund your growth, but they don’t want to take operational control and run your business for you. Its not their job. They don’t want to know in details how you’re going to make something happen, they want you to convince them that you are the person to make things happen.

A good plan is important, it shows you’re thinking things through, that you’re not just moving in the dark on cheap assumptions; and without this, you won’t secure an investment. But your plan will change; and your capacity to adapt and react, to dodge curve-balls, to grab opportunities is what will make your company work. That’s what investors want to see in you to back you up.

6. Don’t be scared of previous failures

You might think that investors only back up entrepreneurs with a successful track record? Well, think again.

Of course, a track record of launching successful businesses is very positive and will be highly valued, but having previously failed at launching companies will not be seen as a negative if you can show that you have learned form it! To directly quote a venture capitalist I met: “I’m more than happy to invest in someone who has failed 2 or 3 times. Actually, I’m probably more likely to invest in someone like this because the way I see it: they have made their mistakes and won’t make them again!”

Never forget that most successful entrepreneurs have failed several times before making it, and that failures will not be seen as detrimental by investors as long as you can show that you have leaned and understood the reasons of those failures.

 


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