Startup Business Plan

Raising Capital Cookbook – Targeting Investors

How to cook a round of venture financing:

  1. A. Cooking Basics:  VCs rarely invest outside their sweet spot of Industry, Stage, and Region.  So you need to try and align your company with VCs that align with your company.VCs stick to their knitting.  They tend to invest in multiple industries and yet most do not invest in all industries.  Some don’t invest in Biotech others don’t invest in Semiconductors. Your task is to target VCs that invest in your sector.
    • Stage – Startup/Seed, Early Stage, Expansion, or Later Stage.  Few investors in seed companies also invest in later stage and expansion companies.  Again find investors that align with your stage.
    • Region – If the VC doesn’t have any investments in your geographic region than it’s a hassle to show up for board meetings to visit just one company.

B. Ingredients:

    1. Start Here: Price Waterhouse Cooper’s MoneyTree Survey – (update July 2017, PWC MoneyTree no longer offers the data required)
    2. Check out deals completed in your region.
    3. Check out industries in your region. Look at the deals done in your industry and your region and take note on which VCs did the funding.
    4. Now look at the stage of funding.

 

C. Preparation

    1. At a minimum.  You should have an 8 – 10 PowerPoint quick introductory pitch, a more detailed 40 slide pitch/business plan and a 1 page executive summary.  Check out the example of the 8 – 10 slide pitch here: Prototypical First Pitch.
    2. Make a list of all VCs who meet your criteria (i.e. you are in their sweet spot).
    3. Make a list of anyone you know who knows someone at that firm.
    4. Develop a whisper campaign.  How are you going to get someone to whisper in the the target VC’s ear that you are a hot deal.
    5. Don’t overcook!  Don’t send blind plans.  Don’t barrage partners.  The idea is to try and get the VCs to ask you for a plan.
    6. Bake at 350 degrees for about 6 months and then let cool.

One of the keys to raising money is to make your company appear to be the pretty girl or for the sake of political correctness the handsome boy at the dance.  The pretty girl at the dance doesn’t ask the boys to dance.  They ask her. (apologies in advance for my political incorrectness).