Venture Capitalists – What Makes Them Tick?

Are you in the process of launching a business and having a major problems when it comes to financing. The difficulty is that even with a great idea and a great team of people, venture capital companies are hesitant to put any money into a company that is not already making millions. What can you do?

Venture capitalists understand risk very well.  When reviewing your business plan – you do have a business plan don’t you? They are asking three questions:

1.    How risky is this business for me to invest in?

2.    What is in this for me – e.g. how much can I earn for investing in this business?

3.    When can I profitably cash out of this business and move onto another?

Answer these 3 questions in your business plan by showing that you have mitigated and minimized your risks by undertaking extensive research.  Show what the return for the investor is likely to be – and please make it believable.  Show them how they can leave your company with a smile on their face and a good return for risking their money in believing you.

Venture capitalists actually are quite happy to invest in good well thought out and planned new companies.  However all new businesses are not equal - here are the less popular types of companies:

1.    Internet only companies – especially if you obviously have no idea how to market it and are not supporting the business with conventional advertising and marketing.

2.    Any business where you ask them to take a share of the profits and do not offer them a stake in the business.

3.    Businesses that have been done hundreds of times before – there are only so many coffee shops that a city can support.

4.    Any business where you are personally not making a financial investment – if you do not want to invest why should they.

5.    Any idea that is poorly thought-out, poorly planned or simply won’t work.

Remember venture capitalists are not the only way to raise business investment. Your first port of call for business investment should always be the bank, SBA and relatives.  Thinks small and grow in a planned and logical manner.  Good luck with your ideas.