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Venture Capitalists | Financing

Venture Capitalist

According to  Learning Direct on online academy, a Venture Capitalist is: “Someone who invests capital in a business venture is a venture capitalist. Conventionally, venture capitalists are looking for a higher rate of return than might be given by more traditional investments”.

Indeed Venture Capitalists (VC) expect a higher rate of return because they take greater risk. Financing a business venture / invention that does not yet have a track record could be quite risky. To minimize that risks VC set very stringent and rigorous measures in place. This is to weed out those ventures /inventions that are weak and which are most likely unable to become a success and produce a favorable return.

A typical invest for VCs can range from $250,000 to $100,000,000. Although some VCs may look at smaller amounts many do not as lesser amounts are often seen as not worth pursuing because of the high cost incurred for investigations and other costly due-diligence activities.

The average Venture Capitalist firm get approximately 1200 proposal yearly. 90% of these are not pursued. A significant detractor is that many of these are inadequately prepared.

•A Novel Invention.

•See what makes an idea patentable

•A Solid Business Plan

•A Ready and Growing Market

•A Robust Management Team and Plan

•A Large -45% or greater –profit margin for investment return

•Excellent IPO Potential

•Success

•The onus is therefore on you, the inventor, to:

•Do your home-work. Research, research, research.

Seek  VCs whose investing is compatible with your invention.  For example- If yours is an intellectual / software type of invention do not approach VCs whose history is investing with medical equipment.

Network. Networking is important here too as in every other kind of business, find someone who knows someone and get an introduction. If you have a good patent or ‘invention’ lawyer s/he would be able to direct you accordingly.

Know your Business. When you have the chance to present your invention and all its wonderful potential to VCs do not waste their time and embarrass yourself. Know every area of your business. Have an intimate understanding of who, what, where, when, why, how, as it applies to the business of your invention.

A good trick that the writer of this article learned in university in exam prep was: Get 3-4 people. Each person writes 5-10 questions pertaining to the subject matter (your invention). You could even specify that a certain number of each person’s questions must be dedicated to each of the aforementioned core areas (and any others that you deem important). With a pool of 15 to 40 top questions in all the important areas you have a good starting point. Be assured that many of those questions would be asked. Practice answering those questions, completely, convincingly, confidently and concisely.

 Be enthusiastic but do not deliberately fabricate. Remember the VC has already spent thousands of dollars investigating the product, market growth potential and other equally important areas.

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