One key term that keeps popping up, especially at the starting phase of businesses, is business financing. Making money available to run and grow the business. After which comes the search for a source of finance for the business.
For a positive result, entrepreneurs need to be prepared in pitching their startup companies to a venture capitalist by anticipating the questions they will receive. The failure to have thoughtful and reasonable answers to venture capitalist’s questions will decrease the likelihood of the company getting funded.
Preparing for A Venture Capitalist
The following will help you prepare yourself for whatever they could possibly ask you.
First and foremost, the venture capitalist will want to know in clear terms what your business is about, and how it would benefit him. You would therefore be ready to say in clear terms what your business does, what the market opportunity is, your location, future prospects and what makes it unique.
Market for your business
You should be able to convince the venture capitalist that there is market opportunity for your business, and that the market opportunity is large. Be prepared to tell them what percentage of the market you plan on taking over, after a certain period of time. Also, why does your business have a high growth potential, and how you were able to arrive at the sales of your industry and its growth rate.
As simple as it may look, for many investors, the management team is the most important element in deciding whether or not to invest. They did want to see the dedication, and knowledge of the industry. Venture capitalists would want to know who your key team members are, what relevant experience they have, if they are capable of executing the company’s business plan, number of employees, and plans to increase the number of employees.
Your products and services
You must clearly state what your products and services are, and why they will be accepted in the market. Tell them why users will care about your products and services, they key upgrades you want to come up with, and what makes it different from the lot out there.
You will have to show you know about your competitors. Who are they, and what competitive advantage do you have over them. What advantages do they have over you as well, and what are the barriers to entry.
Marketing your business
The investors would want to know how the company plans to market itself, the cost of acquiring a customer, and the long-term value of a customer. So, be prepared to divulge your plan to market your products and services, the business’ social media strategy, and the medium of advertising.
Irrespective of the fact that you are sourcing for fund, any investor will want to understand the company’s current financial situation and proposed future burn rate. They expect you to tell them what the company’s first three years projections are, the assumptions underlying such projections, as well as when will the business become profitable.