Smart Ways to Find Private Equity and Venture Capital
By Thomas C. Su
2/24/2009
Capital raising is a form of marketing, like any business, your journey to
raise capital should be regarded as a marketing activity. I have heard a phrase
that Capital Raising is 80% Marketing and 20% Finance, a point which I tend to
agree.
First is leads generation process: Generating leads - finding private equity
firms and venture capital firms, identify them from capital providers guides or
databases.
Second is to prepare for your "Sales Pitch" - why should venture capital
providers look at your business. Have you conducted competitors analysis that
maybe your business is just the same as others? Create your unique selling
points - USPs - so that you can convince the private equity and venture capital
providers about it.
Third - create a summary page - create a 3-5 pager summary about your
business, and use that as a document to approach private equity and venture
capital providers. Some capital providers like to see the whole business plan,
but usually start off with the summary page.
Fourth - You are the best sales person for your business, not the corporate
advisors, there will always be lots of corporate advisors try to help you, fees
vary, but at the end of the day, private equity and venture capital providers
are not really interested in talking to corporate advisors. In fact, many
private equity firms and venture capital providers have no-advisor approach
policy. So you can only use corporate advisors to open doors, but you have to
close the deal yourself.
Fifth - Always look for global opportunities - look for venture capital
providers offshore. If you have an international plan, you can always have a
much better chance in raising capital from venture capital firms.
Sixth - Prepare marketing materials - upgrade your website, change them to
more investment grade websites, add more contents to your website and implement
more marketing activities especially web marketing activities.
Seventh - Prepare for an interview - interviews with private equity and
venture capital firms are not an easy process.
I have been through quite a few myself, and these are harder than job
interviews. Many innovators are introvert people, or tend to talk too much
technical terms, these are not suitable for private equity and venture capital
firms. Remember, you are asking for money from them - they care about the
returns they can make.
Remember, keep things in simple language, companies have raised capital using
a 5 pager summary instead of 300 pages business plans - because investors
understand what they are talking about. Warren Buffet's investment principals
include Never Invest In Products You Don't Understand, venture capital firms do
the same as well - try not to talk too much technical expressions or include
them in your business plan.
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