1. Ready for show time? Is your story compelling enough to interest venture capital investors? Some businesses, even if they succeed, simply will not get large enough to deliver the kind of scaleability and potential future returns that venture investors often seek. Do you have demonstrable results? Customer traction? Patented intellectual property? Consider raising a small amount of money from angels or from friends & family first in order to reach important milestones that will make your business more marketable to venture firms. Consider whether you want to raise money in the form of equity, debt or a mixture of the two.
  2. Documents. Prepare three documents: (i) a thoughtfully reasoned full business plan; (ii) a one to two page executive summary of the business plan; and (iii) a presentation. A full business plan should include a business model, detailed information on your target market, financial projections and assumptions. Remember: even if most investors do not read the full plan, the process of writing it will help you better tell your story and address questions from investors. Be sure that you can defend each fact, assumption, projection and conclusion that you include in these documents. If you are not a good writer, ask a friend who can help or hire a good writer.
  3. Build your core team. This is critical to investors, and it is important to articulate clearly your background and experience, who has joined the team and who will likely join the team. Do the founders have money or meaningful “sweat equity” in the company? You want to impress upon investors that you have the committed team members necessary to take the next steps toward your vision, and indeed that you are able to identify any gaps to be filled in the future.
  4. Build your team of advisors. Surround yourself with good advisors who are experienced in raising venture capital, whether board members, lawyers, accountants, professional investors or industry experts.
  5. Target list. Create a target investor list using key criteria including: (a) industry sector; (b) investment stage (i.e., Seed, Series A, B, C, etc.); (c) amount to be raised; (d) comparable/competitive companies; and (e) potential investor contacts. Find out as much information as you can about the current investment status or activity level of your target investors.
  6. Details Matter. Know your numbers and models inside out when preparing your pitch.  Investors will want to know about your credentials, market conditions, your data, plans for scaling up and to tell them something they don’t know.
  7. Practice your pitch. Find a friendly audience (including at least one experienced investor) who can help identify gaps and weaknesses in your pitch. Be sure to have a 30-second version, a three minute version and a fifteen minute version. You must be able to articulate your vision succinctly and in plain English. When you make your actual presentations, space them so that you can incorporate feedback and suggestions in subsequent pitches. If you cannot clearly explain your business (and why it is different) in three minutes, investors are often out the door.
  8. Competition. Know your competition and be prepared to distinguish your business model. Saying that you do not have competition is often the wrong answer.
  9. Understand your capitalisation table. If you don’t understand the basics of a company’s share capitalisation, then ask someone to explain it to you (g., the difference between issued shares, reserved option pool and granted options; preferred shares vs. ordinary shares etc.). Prepare a detailed capitalisation table. Know exactly who owns each share in your company. Document share options right away, and avoid vague, open-ended or ambiguous future equity promises, such as offering someone a percentage of the company – be clear that you are offering them a percentage of the company as of a particular date or event. Don’t leave equity arrangements unwritten. Learn more about cap tables in our article What Is A Cap Table, Why Do You Need One and What Should It Look Like?
  10. Be ready for the next stage. If you get a “bite”, be ready to proceed – which will involve the investor wishing to carry out due diligence. Learn more about due diligence in our article What is Due Diligence and What to Expect From The Process.