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inordinate amount of time asking entrepreneurs about their background.
Be ready to answer these queries.
TIP THREE:
No chips on the shoulder, please! There are several reasons why VCs
focus on people instead of business concepts. A VC recently told me how he was
impressed by an online training start-up, which however failed an acid test: the
CEO ignored his questions and even refused to talk about the last
round valuations of his company. The company expectedly lost the
fund. Moral of the story: there’s no room for attitude.
TIP FOUR:
Get yourself a sound revenue model. Good VCs scoff
at hockey-stick curves and Venn diagrams, and most VCs don’t
put much value on the five-year revenue projections either.
What’s getting important are revenue models that go beyond the traffic statistics.
Gone are the days when VCs would get impressed with targets of “eyeballs”
or “sticky eyeballs.”
TIP FIVE:
Go into details; it’s not enough to build a product. VCs are also concerned
about how you propose to use their capital. First, are you raising enough money to
allow yourself to concentrate fully on your business for at least six to seven months?
And what are some of the milestones that will lead to a jump in the next round’s
valuation? It’s not enough to build a product; they want to see business development
traction. Details are everything.
TIP SIX:
Keep looking for money, unless you sign up on paper. A lot of entrepreneurs
complain that VCs string them along and only feign interest in their companies
in order to force them into making a deal with their backs against the wall.
Here’s some advice: never ever scale back your fund-raising activities
until you have a term sheet. You and a VC may be sold on each
other, but until you have formal commitment from the firm, keep
looking for money.
Tip seven:
Be credible. As part of due diligence, the venture
capitalist will always check on the integrity and market
reputation of the promoter, in addition to checking out his management capability.
Therefore, credibility is extremely important. Lack of business transparency is
an absolute no-no.
So, invest time in preparing for your first encounter with the VC. The fact is there are
no second chances. The old cliché that you don’t get a second chance to make a first
impression couldn’t be more true.
n
According to an estimate, in the
year 2000 alone, around $32 billion
of VC funds will be raised across
the globe with 60 percent going to
the infotech and related sectors.
