Guide to Getting Funding from Venture Capital
In addition to promising business ideas, companies need capital to grow. Of course, there are various ways you as a business owner can raise capital. However, one of the best ways you can do this is by getting funding from a venture capital (VC) company.
In addition to providing large amounts of capital, venture capital companies can also help you develop a business strategy. Venture capital can also introduce you to potential buyers, partners, to employees who are experienced in their fields. Getting funding from venture capital companies is certainly not an easy thing. The process even takes a long time.
Steps to Get Funding from Venture Capital
How do you get your company to get funding from a venture capital company? Here are the steps you can take:
1. Define your business goals
Before applying for funding from a venture capital company, make sure you know your business goals. Do you just want stability? Or want your business to be at the forefront of its field?
Venture capital companies certainly want to invest in companies that can provide big profits. If you want to create an empire, of course venture capital will be ready to help.
2. Make sure your company is ready to receive funding
Each company has a different time to receive funding. Ideally, you don't just have a good business idea when you approach a venture capital firm. Your readiness to receive funding is also seen from other factors. For example, the sophistication of the technology used by the company and the impressive management team. The presence of these factors makes your funding opportunities higher.
3. Find the right VC company for your business
Venture capital companies usually already have criteria for companies that will be given funding. These criteria include:
- Specific industrial sectors, such as digital media, software, biotech, and others
- Funding stages, such as series A funding, series B, and so on
- The location of the company, for example in Jakarta, Bali, and others
Before approaching a venture capital firm, try doing some research to find out what the VC's focus is. Make sure their focus matches the conditions of your company. If you already have a list of VCs you'd like to approach, try inviting them to a meeting.
Venture capital companies certainly get a lot of emails from companies every day. That's why the best way to get a VC firm's attention is to ask your colleagues to introduce you.
4. Prepare the necessary documents for venture capital
If you've managed to get the attention of a VC firm, it's time to win over them. The following are some of the documents you will need to prepare in order to successfully secure funding from a VC firm:
- Elevator pitch
The first step you should take is to prepare an elevator pitch, which is an explanation of your business. Keep your elevator pitch short and easy to understand, but catch the attention of venture capital firms.
- Business plan
This document should describe in detail your plans to grow the company. In addition, the business plan also contains the latest financial status of the company. You should also explain how the company will use and return investors' money.
- Pitch deck
A pitch deck is a presentation that presents an overview of your business. For example, the business model, products or services offered, opportunities in the market, funding needs, and the management team.
5. Review the given term sheet
When you enter the next stage, venture capital companies that are interested in providing funding will prepare a term sheet. This document contains the requirements for reaching an agreement. The conditions that are usually mentioned in the term sheet are how many shares of the company they will own and the amount of funding provided.
In addition, other requirements are company valuation, investor rights, voting rights, and shares. When reviewing the term sheet, you should be accompanied by a lawyer or legal team. In addition, the presence of a legal team is also required for the negotiation process.
6. Complete Due Diligence
Furthermore, the venture capital will usually do due diligence. The success of the funding will be determined whether or not due diligence is good.
Due diligence is a process carried out by investors or lawyers appointed by investors to collect the necessary company data. This data collection is used to measure the risks that may occur when funding your company. The data collected can be in the form of financial reports, competitor analysis, intellectual property, to posts on the social media of the company's founders.
Funding from venture capital companies or venture capital is very important for the company's success. By understanding the working process of funding, your success rate in getting investments from VC companies will be even greater.
That's the guide to getting funding from venture capital to advance startups. After that, you need to go deeper in managing business strategies to make the company run on the right track. Take part in the Strategic Business Analysis program from prasmul eli to be able to implement it into your business more precisely.