How to Raise Venture Capital
Now that you have a complete venture capital quality plans, set of financials, and an investor presentation, now what? Unlike some business plan consulting firms, Blue Horizon Venture Consulting works with clients from beginning to end, and a good plan isn’t worth much unless you can use it to capitalize your business. BHVC is proud of its track record of getting the majority of its clients funded, and we will work with you to locate, contact, present, and negotiate with the various sources of capital.
Many entrepreneurs underestimate the amount of work involved in raising capital, thinking that a good business plan alone will have investors breaking out their checkbooks to write checks. In reality, the process of raising capital can be extremely time consuming and can be a major source of frustration for small business owners.
The first step in this process is locating the right investors. Most investors will only make investments close to their place of business/where they live and only in industries in which they have considerable knowledge. So it’s important to locate investors who are willing to invest in your industry and in your location. A significant amount of time can be saved by following this simple rule. BHVC has a comprehensive database of venture capital firms and angel investors, and can help you target the right investors.
Getting the foot in the door is only the start. Once an investor expresses interest in your company, you will need to defend you business plan and its assumptions. If you can pass that test with an interested investor, you can sit down and begin to negotiate what’s called a “term sheet” outlining the terms of your investment. It can often be beneficial to negotiate with multiple investors as the same time. If an investor knows they are competing against other potential investors, you are more likely to get favorable terms that if they know they’re the only game in town.
Even then, your work is far from complete. Most investors require that you go through a fairly exhaustive “due diligence” process, during which you are required to provide them with very detailed information about the inner workings of your business, including all contractual relationships you have (customers, vendors, and employees), any debts or receivables you have, any legal issues, etc. Preparing your due diligence package in anticipation of this request can make you look very good in the eyes of an investors, and BHVC can assist you in putting this package together.
BHVC is not a licensed securities broker, and as such, we cannot currently be compensated on the basis of a percentage of capital raised. For existing business plan clients, however, in many cases we will agree to defer a significant portion of our hourly billing until after you have succeeded in raising capital. And if you don’t, you owe us nothing. On occasion BHVC will assist in raising capital for non-client groups, however a full business plan review must be conducted and the plan must achieve BHVC quality standards before we will embark on capital raising efforts on your behalf.