Contacted By Venture Capital...

[GetShitDone]

Our start up has been contacted by a venture capital investment fund that invests in early stage starts up and it invests up to $1M. (Larger investments for later rounds but we are early stage at the moment)

We have gained traction, have a proven business model, and a solid strategy in place to move forward. All we need is the investment capital.

They contacted us telling us they were interested in our business model and asked us for a meeting.

How should I prepare for this and what should I expect? What are the other benefits besides money when it comes to investment funds/Venture capital ?

Thank you !

 

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[themaxx]

Do you need the money? Beyond money, hopefully VCs will provide advice, connections/introductions and promotion for your business.

 

[theag]

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalist/dp/1118443616/ref=sr_1_1?ie=UTF8&qid=1430479894&sr=8-1&keywords=venture deals is a good read to understand more about the process.

Keep in mind that once you raise VC you will probably need to raise more in 12-18 months as they will probably expect fast growth. It will also take a lot of energy to go through the process and you will give up a good chunk of control over your company.

So the no 1 thing to do is to do some serious soul searching if you really need and want to raise money at this point or if you can grow organically. Depends heavily on your business model of course.

That said, definitely take the meeting, even if you dont want to raise money at this point. This article explains why: http://www.bothsidesofthetable.com/2010/11/15/invest-in-lines-not-dots/

 

[csalvato]

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalist/dp/1118443616/ref=sr_1_1?ie=UTF8&qid=1430479894&sr=8-1&keywords=venture deals is a good read to understand more about the process.

Was going to recommend the same book. You should probably pick it up.

Note: I haven't read it but heard very good things.

 

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[MJ DeMarco]

Whenever I met with VC's they always asked for a business plan. This wasn't good news because I didn't have one, LOL.

You might want to put together a business summary of the business's highlights, sales, profits, margins, growth prospects in various channels, product development, etc. Also have a valuation in mind because should an investment be offered, they will base it on some arbitrary number.

 

[throttleforward]

Keep in mind that once you raise VC you will probably need to raise more in 12-18 months as they will probably expect fast growth. It will also take a lot of energy to go through the process and you will give up a good chunk of control over your company.

Wanted to 2nd this. I'm currently trying to raise money, and the VCs I've talked to said that my business is attractive, except that I won't be able to double their investment in 12-18 months (right now I can double in 3ish years).

That said, if VCs are approaching you, you are probably in a position to shop around. I'd at least talk to them (and go through the paperwork/application motions) and use the experience you've gained to approach others.

Also, consider the fundraising ecosystem and the goals for each tier in order to temper expectations. Perhaps VCs aren't right for you because of their ROI timelines, but angel groups are as they tend to be a little more long-term focused than VCs.

 

[throttleforward]

What are the other benefits besides money when it comes to investment funds/Venture capital ?

Also, there a HUGE ecosystem of media that almost exclusively covers startups, especially tech startups (which I assume you are since VCs are approaching you). A great side product of getting an investment is the press, which usually starts a PR feeding frenzy both locally and nationally. This may lead to better SEO, futher PR opportunities, more customers, etc.

 

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[csalvato]

Have you gone to www.angel.co and seen other companies that raised big rounds of funding?

If not, I would consider going there, finding similar companies (preferably in your industry) and ask the CEO for advice on raising money in that vertical.

Would probably be WAY more valuable than ANY info you get on here...

 

[throttleforward]

https://www.cbinsights.com/blog/startup-failure-post-mortem/
101 Startup Post Mortems - many of them dying due to funding issues

 

[GetShitDone]

Thanks so much guys.

1) We do need the money to scale nationally with a seed investment and then go international with a Series A.

We have a plan on how to use the seed investment for the next 12 month period of our national expansion. (Australia has a 23M+ population with 4-5 major cities.)

2) TRACTION - Regarding recording numbers, sales, profits, margins, etc: We have all that but not a lot as it's a month old company. We've been featured in a few press articles. Do seed investors shy away from low traction? We have shown traction.. a demand.. a way to service that demand..etc. Just not a lot. Will they tell me to go get more traction even for a seed investment?

3) Our business model has already been proven overseas successfully and it is an interesting product to say the least.

4) We have finished a pitch deck which we are going to send out to seed investment funds for the first time.

 

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[theag]

Its easier to sell the dream of fast growth with no traction yet, than to sell low traction. Just look at all the ridiculous fundings. So if you want to raise VC at a good valuation, once you get your feet on the ground, you better start running FAST and dont stop. At least for typical VC equity investments.

But again, depends on your business model... If you go to investors with product/market fit in hand and some traction to prove it, then I guess thats a good start .

 

[elbambino]

Our start up has been contacted by a venture capital investment fund that invests in early stage starts up and it invests up to $1M. (Larger investments for later rounds but we are early stage at the moment)

We have gained traction, have a proven business model, and a solid strategy in place to move forward. All we need is the investment capital.

They contacted us telling us they were interested in our business model and asked us for a meeting.

How should I prepare for this and what should I expect? What are the other benefits besides money when it comes to investment funds/Venture capital ?

Thank you !

First and foremost, congrats dude! an audience with a V/C does not come easily. If I was in your shoes, I would bring what I think is important and then some. A Business plan, a presentation (preferably a powerpoint) regarding your product/services, a fun and interactive demonstration would be some on the list. This first meeting is all about what you got. They want to see the person they're potentially going to invest 1 million dollars into. Walk in there organized and with FULL confidence in yourself. Prepare yourself as if this was really it. Once the meeting is done, they will tell what they need.

Remember brother, KEEP IT SIMPLE and straight forward. GOOD LUCK!

 

[GetShitDone]

Its easier to sell the dream of fast growth with no traction yet, than to sell low traction. Just look at all the ridiculous fundings. So if you want to raise VC at a good valuation, once you get your feet on the ground, you better start running FAST and dont stop. At least for typical VC equity investments.

But again, depends on your business model... If you go to investors with product/market fit in hand and some traction to prove it, then I guess thats a good start .

Good point.

The only reason we have low traction in the first place is because we were only operating for a short period of time + minimal marketing. We wanted to get our "feet wet" in order to learn how to improve the consumer experience rather then experiencing rapid growth all at once. Maybe one can call it a "beta launch" ? I guess thats what we went through, however we never said we were beta.. we simply just launched.

I guess I can pitch the truth which is that we went through a psuedo-beta launch and now we know the systems/processes to make the consumer experience second to none. We have a plan and we need the money to implement it.

First and foremost, congrats dude! an audience with a V/C does not come easily. If I was in your shoes, I would bring what I think is important and then some. A Business plan, a presentation (preferably a powerpoint) regarding your product/services, a fun and interactive demonstration would be some on the list. This first meeting is all about what you got. They want to see the person they're potentially going to invest 1 million dollars into. Walk in there organized and with FULL confidence in yourself. Prepare yourself as if this was really it. Once the meeting is done, they will tell what they need.

Remember brother, KEEP IT SIMPLE and straight forward. GOOD LUCK!

Thanks man!

Well we are bringing our "Seed Deck" which will act as a PowerPoint presentation with visuals and content that we would show to potential investors.

I will combine a solid pitch with the seed deck at the meeting. A fun and interactive demonstration sounds good too.

To be honest, I do get intimidated sometimes when we meet investors/partnership meetings who are much older, experienced, and established then me (I am only 20 years old.) I'm improving on getting the confidence up with no fear each time.

 

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[jpmartin]

Good point.

The only reason we have low traction in the first place is because we were only operating for a short period of time + minimal marketing. We wanted to get our "feet wet" in order to learn how to improve the consumer experience rather then experiencing rapid growth all at once. Maybe one can call it a "beta launch" ? I guess thats what we went through, however we never said we were beta.. we simply just launched.

I guess I can pitch the truth which is that we went through a psuedo-beta launch and now we know the systems/processes to make the consumer experience second to none. We have a plan and we need the money to implement it.



Thanks man!

Well we are bringing our "Seed Deck" which will act as a PowerPoint presentation with visuals and content that we would show to potential investors.

I will combine a solid pitch with the seed deck at the meeting. A fun and interactive demonstration sounds good too.

To be honest, I do get intimidated sometimes when we meet investors/partnership meetings who are much older, experienced, and established then me (I am only 20 years old.) I'm improving on getting the confidence up with no fear each time.

I see you were raising VC funding earlier this year? How did it go? Care to share the details...? If you're still looking to tackle this, check out this post.