Prepare for a Venture Capital before asking for funding
As a startup, you would need investment. You will have to prepare your pitch for the Venture capital (VC). Here are some points you should expect any VC to focus on while pitching. So better prepare for them.
Funding range
Before reaching out to the investors you need to do thorough research on their past investments. Get the idea if they match the investment amount you need and indicate clearly how much you are asking while pitching. It would be ridiculous to ask an angel investor for $1m who only invests up to $25k.
Returns
Most VCs are institutional investors who need concrete results. They wont just invest in your idea or product if there is no viable return from the investment. You need to clearly indicate an exit strategy or a list of strategies, for example, listing on public markets, trade sale, clear dividend policy, Management Buy-out, selling of core IP, etc. Usually, VCs expect to have an IRR of 20 percent per annum, though it may vary. So while asking for an investment you need to show the growth projection and valuation that cross the expected returns of the fund. And of course, you need to show facts that your assumptions are reasonable.
Time
VCs are institutional investors and their investment funds usually have a life span from 5 to 15 years. They want their returns back within the time.
You can ask them about their investment runaway and get an idea how much time the VC can invest before calling for an exit.
Interest
It is very important that your startup aligns within the interest of the VC so that they understand the products simply and fast. Also your startup should be in the warm vertical where valuations are growing. VCs are interested to get higher return so they wouldnt likely invest in a dreary vertical.
Product scaling
You need to have a solid business model to show how the company is getting a grip on the market and how it would expand. VCs will invest after determining your valuation and growth projection, so you need to show them specific vertical instead of confusing them with multiple revenue streams.
Unique proposition
Quite often there are similar ideas among the startups. VCs will ask how you would compete amongst them to defend your market share. You need to have a unique proposition and a good IP, strong team or great retention rates will add to your values.
Trust
All VCs are concerned about if the CEO could unite his people and resource to carry out what they want to achieve and if the business plan is realistic. VCs will not invest if they dont trust the entrepreneur with their money in the long term.
Other investors
All VCs do not have adequate experience to understand all the verticals. They expect more investors who that together they could guide the startup. Besides, VCs like to see if others found your idea sustainable or if you were able to convince others to fund. So it is best to go to a number of investors. Even if investors say no to fund you could ask for feedback to improve your pitch and build up your case.
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