12 mistakesnottomakewhenapprochinhvc


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Do you want a Venture Capitalist for your plan?
Avoid These 12 Mistakes

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12 mistakesnottomakewhenapprochinhvc

  1. 1. Avoid these and your venture is sure to receive that investment it so desperately needs . This is a Copyright Of HUM
  2. 2. <ul><li>“ I magine a situation where you are at the door of your VC firm , on the threshold of the first meeting with a prospective investor . If the deal falls through , your venture could receive the backing it needs to secure its position in the market there will be no looking back then. While you wait at the reception , your eyes fall on a poster on the wall ‘the rules we play by’ .we tell you what could be at that poster” </li></ul>This is a Copyright Of HUM
  3. 3. 1)KEEP THINGS SIMPLE: <ul><li>VC investors are busy person. </li></ul><ul><li>They don’t have time to sift through your lengthy business plans . </li></ul><ul><li>Make your points with clarity , brevity and confidence. </li></ul><ul><li>Tell in brief what your company is out to do and how it intends to cover the gap in the market. </li></ul><ul><li>Highlight your main points ,This is important to break the deal. </li></ul><ul><li>Prepare a good ppt to present. </li></ul>This is a Copyright Of HUM
  4. 4. <ul><li>Sasha Mirchandani, Managing Director , Blue run ventures and co-founder of , Mumbai Angels says- </li></ul>“ It is always best to send a sharp presentation comprising not more then 15 slides and a single page summary . If you send me a 4 MB files , I may never find time to download it . In a concise presentation , tell me what your business is about in the first slid itself . Don’t put too many photos or crowd the slides with too much text .keep it simple.” This is a Copyright Of HUM
  5. 5. 2) NEVER COLD CALL , GO THROUGH A GOOD REFERENCE: <ul><li>The idea of simply picking up the phone and calling aVC is not great. </li></ul><ul><li>Go your way through a good reference , this will make your task much simpler and smoother. </li></ul><ul><li>A reference from your own industry could tell VC about your potential and where you stand in term of past performance </li></ul><ul><li>Like how gud is your team etc </li></ul><ul><li>Basically it lends credibilitry to the whole approach . </li></ul>This is a Copyright Of HUM
  6. 6. Niren Shah , Managing Director . Norwest Venture Partners says This is a Copyright Of HUM
  7. 7. 3) DON’T WALK ALONE , BUILD A GOOD TEAM <ul><li>The importance of a good team can’t be emphasized enough. </li></ul><ul><li>Good team matters a lot to a company . </li></ul><ul><li>If the team members heading the various core functions can visualize the future of the company and work cohesively toward achieving it , </li></ul><ul><li>This will increase chances of VC to believe in your company too. </li></ul>This is a Copyright Of HUM
  8. 8. “ I would like to see the team structure and who’s on it right there on the second slide following the business idea one the first one .It is a crucial factor. ” “ Do you have the necessary skill sets to complement each other ? That is more important Question .” says Mirchandani Explains Shah This is a Copyright Of HUM
  9. 9. 4) DON’T MESS UP THE MATH: <ul><li>The business idea you are out to sell should have a clear monetization model . </li></ul><ul><li>In the early stages of the business lifecycle ,the risk associated with the venture is generally very high as a result of which the VC expects a high rate of return. </li></ul><ul><li>To convince VC that your venture can take flight successfully , you need to have well charted revenue flows, a bank of current/ potential customers. </li></ul><ul><li>Make ways to scale the business in a non-linear way . </li></ul><ul><li>Their should be a definet businesss plane. </li></ul>This is a Copyright Of HUM
  10. 10. Take an example- <ul><li>Let us take an example of Facebook to understand this- </li></ul><ul><li>At one point in its business lifecycle , the base of facebook users grew exponentially to 100 million user , yet the company was servicing them with a mere 100 employees . If this </li></ul><ul><li>growth was linear , face book </li></ul><ul><li>may had to hire 100 million to </li></ul><ul><li>serve its growing customer </li></ul><ul><li>base : liner growth affects over </li></ul><ul><li>head costs and returns long run </li></ul><ul><li>and may not suit to the taste of </li></ul><ul><li>VCs , who are increasingly crashing </li></ul><ul><li>the investment lifecycle </li></ul>This is a Copyright Of HUM
  11. 11. 5) LET THE PRODUCT NOT BE ONLY AN IDEA, GET A PROTOTYPE: <ul><li>Few VC’s are interested in investing in concept-stage companies. </li></ul><ul><li>You may have a great idea , a concept you can clearly visualize in your mind ,also make VC to visualize it </li></ul><ul><li>Make a tangible prototype to show VC </li></ul><ul><li>Properly explain how it works and give them reasons to feel exited about your product </li></ul><ul><li>If it is a service show them a small demo of it if they were your customer </li></ul>This is a Copyright Of HUM
  12. 12. “ The days of man with plan (on paper) are largely over . If you are an internet company , you better have a functional website with some customers already on it . Following the recession of the past two years .VCs are not encouraging fresher's without any domain experience or expertise” Says shah This is a Copyright Of HUM
  13. 13. 6) DON’T FORGET TO SKETCH YOUR EXIT OPTIONS: <ul><li>No VC invests in a company for fore ever . </li></ul><ul><li>They are in the game for any where between five to seven years. </li></ul><ul><li>Show them how your company will scale and what exit option is there for him. </li></ul><ul><li>Create a large picture of your business such as , well it scale enough to be acquired by a bigger player?, Where u get PE funding? </li></ul><ul><li>Sometime it become difficult for an entrepreneur to come to terms with exit point bcoz it could also mean loss of control at an individual level for him as the original owner of the business </li></ul>This is a Copyright Of HUM
  14. 14. 7 ) DON’T MISS THE(RE)SEARCH BUTTON: <ul><li>Different VC firms deal with different areas of investment; </li></ul><ul><li>Some give preference to each ventures while others are more generic. </li></ul><ul><li>Do some research to figure out who are the VCs most likely to support your business, </li></ul><ul><li>What are the kind of deals they do, the stage and size of deals they do etc. </li></ul><ul><li>This will help you to fix your deal. </li></ul>This is a Copyright Of HUM
  15. 15. “ Don’t be lazy about the background check’ calibrate the fund. It will make your task that much easier,” Sasha Mirchandani, Managing Director , Blue run ventures and co-founder of , Mumbai Angels says- Niren Shah , Managing Director . Norwest Venture Partners says It is important to understand what the VC partner is looking for and how they work. Decipher the chemistry as the deal is not a one-way street; it often works like a marriage.” This is a Copyright Of HUM
  16. 16. 8) DON’T LEAVE THE LEGAL LOOPHOLE UNPLUGGED: <ul><li>Most VC deals involve standard investment policies with terms like veto rights, preference shares and tag-along rights finding in the deal agreement. </li></ul><ul><li>It maybe a good idea to appoint a lawyer to negotiate on your behalf instead of the team simply relying on term sheets (a document outlining the material terms and conditions of the business agreement) to close the deal. </li></ul>This is a Copyright Of HUM
  17. 17. <ul><li>Says Shah,“Don’t be bogged down by these terms. They are included to protect the rights of the VC and are a standard norm which is followed by the most,” </li></ul>This is a Copyright Of HUM
  18. 18. 9)DON’T LET THE PERFORMANCE STAGGED <ul><li>While you are raising funds for the company, don’t let the performance suffer because of this. Fund raising could take days or even months in certain instances-but you cannot ignore core operations because of it. </li></ul><ul><li>It may be too risky to let the performance dip at an early stage; </li></ul><ul><li>It’s a bad sign if you are claiming a high growth potential and showing otherwise. </li></ul>This is a Copyright Of HUM
  19. 19. “ The VC is just assuming that you are performing as you have claimed-don’t tell me later that ‘I was off the ball due to fundraising; no V C is going to buy that kind of excuse,” asserts Mirchandani This is a Copyright Of HUM
  20. 20. 10)DON’T BE TOO CONSERVATIVE OR OPTIMISTIC: <ul><li>When presenting your business plan, you need to walk a fine line between thinking too small and flying too high. </li></ul><ul><li>Your vision should be clear. </li></ul><ul><li>Reason why you adopted this . </li></ul><ul><li>Many business man start with very aggressiveness but are unable to maintain till the last. </li></ul>This is a Copyright Of HUM
  21. 21. “ I see too many entrepreneurs thinking too small. You must explore the possibilities of growth fully,” Keep the projections realistic though,” cautions Shah. Aggressive business owners who think they can achieve the impossible, don’t end up always as favorites. “If no one else is doing what you are out to do, there may be a reason for it,” says Mirchandani Explains Shah This is a Copyright Of HUM
  22. 22. 11)DON’T FOCUS ONLY ON TECHNOLOGY <ul><li>The technology backing your company may be unique, it may be the lifetime of your operations, yet it is not everything. </li></ul><ul><li>A business today operates in a dynamic global environment and strategy, </li></ul><ul><li>Today’s business requiring a constant study of the market, evolving customer needs and the moves of the competition . </li></ul>This is a Copyright Of HUM
  23. 23. “ Your technology may be the best in the world but the business cannot operate in isolation. There are many dynamics affecting the business on a day-to-day level, talk about those too. Throw light on both the customers and competitor,” says Mirchandani. This is a Copyright Of HUM
  24. 24. 12) NEVER LET THE PASSION BURN OUT <ul><li>The business idea that is your baby will always be close to your heart. </li></ul><ul><li>The prospect of someone else rejecting that idea and not identifying with your vision can surely be putting off. </li></ul><ul><li>But don’t get dishearted. </li></ul><ul><li>You may have to go through a series of naysayers before getting the final VC nod </li></ul>This is a Copyright Of HUM
  25. 25. . The passion to realize the dream should never die. A VC is just a financer in the process , weather they say yes or no , you would any ways go a head and implement your plan,” Concludes Shah This is a Copyright Of HUM
  26. 26. <ul><li>This makes it clear that a blend of persistence, patience and performance could land you that dream VC deal . Knock the door of the next VC with these rules in mind and the game should be fun . </li></ul>This is a Copyright Of HUM
  27. 27. This is a Copyright Of HUM