Startup: DOs and DON’Ts When Asking Venture Capital Funding

December 30th, 2015

With just one day left to New Year’s Eve, good intentions abound. Some people throw themselves on diets, others on new loves or work. If your purpose is to change your life and pursue your business idea, then it could be useful to know how to raise money from a venture capital fund.

Hence, here are 5 things to do and 5 things not to do when you are telling your project.

1. You should write a well-structured pitch deck in which you highlight your project’s vision, strategy, tactics, target market, financials, sales&marketing strategy, and explain what you intend to do with the money you are asking for. The quality of this work will be the quality that the fund expects from your company, so attention to detail is essential.
2. Show that you understand the importance of having an excellent management team, which has to be in line with the company’s strategy. The choice of your team is a fundamental part to your project’s development. If your team is not complete yet, show that you know exactly how to build it in the near future.
3. Prove that you can put your theory into practice. The secret of a successful story is its execution more that its concept, i.e. how you concretely pursue your goals and how you carry out small but countless everyday decisions. If your project’s execution is poor, it will lack consistency between ideas and facts.
4. You’ll need to prove that your project is based on extensive research. You must demonstrate that you perfectly know your market and your competitors – as well as the investors who have financed companies like yours. Most of all, you need to explain why you believe that this specific venture capital fund is a fit for your company.
5. Last but not least, you should end the meeting focussing on your next steps (if there are any) and expressing what you think you have learned from the exchange with your (potential) future shareholders.

But be careful when you are planning you meeting, as you should also consider that:

1. At your first meeting, you shouldn’t ask the venture capital fund to sign a Non-Disclosure Agreement (NDA). The fund is not going to replicate your ideas elsewhere and is probably already analysing other similar opportunities – if it isn’t doing that yet, it probably will in the near future.
2. Arrogance never helps. You need to focus on listening even if you do not agree with them. If there will be a deal, the fund will become your close companion (and shareholder!) for years and, as such, interactions with them will have to be constructive and respectful of other people’s ideas.
3. You shouldn’t solely and exclusively focus on your own earnings or keeping the majority stake in the company. Venture capitalists do not support lifestyle businesses but only companies that can multiply – ‘n’ times – the fund’s returns.
4. You should never state that: “monetization is not important, I just want to make a great user experience.” Only few people can afford to say these words and still get credit. So, if you’re not Zuckerberg, Dorsey, Page, or Brin, you had better ground your project on a solid business model.
5. Never try to hide or change reality: stating things as they are will help you not contradict yourself and rapidly reach your goal.

These few small but useful tips will help you get the most from the positive startup funding trend that has been recently observed in Italy. Indeed, we are at last witnessing a growth in startup investment (€ 133 million, +32% compared to 2014). New entrepreneurs can look at this encouraging trend not as a passing phenomenon, rather, as something that is here to stay in the long term. Therefore, if you are a potential startupper and you want to be part of the revolution that has finally reached Italy, be aware: a good pitch with an investor is definitely an excellent starting point.

By Glenda Grazioli