Key things VC’s & Investors look for in Startups

Key things VC’s & Investors look for in Startups

By Geoff De Weaver, CEO + Founder, Touchpoint Entertainment Inc.
https://geoffdeweaver.com/

 

This article is totally based on the last two decades of personal experience, living in global markets like: San Francisco, New York, Sydney, London and Taipei, Taiwan.

San Francisco, Silicon Valley, New York City and Massachusetts are where the dominant VC and investors are located. They control approximately 85% – 90% of all investment globally and, having worked with VC’s, Angels and investors in these and other global markets, I can highlight some common elements and themes that always seem to show up and get raised when talking about funding.

To clarify for new readers and to ensure everyone understands where I’m coming from –

Here’s my 101 definition of the term Venture Capital:

‘Venture capital, also abbreviated as “VC”, is a sub-set of private equity, and refers to institutional investments in early-stage, high-potential growth companies (perhaps like yours).

Private equity refers to investing in shares in privately held companies, rather than publicly traded stocks.

And in this context, institutional means that venture capitalists are NOT investing their own money, like “angel” investors do.

Instead, they are investing money on behalf of institutions, such as pension funds and university endowments (as well as the collective funds of very wealthy individuals).

A venture capital firm is an investment company that regularly makes venture capital investments.

The size of the venture capital fund is the specific amount of money the venture capital firm has raised from pension funds, etc. Successful venture capital firms regularly raise new funds to invest in promising new companies.

A venture capitalist is an individual who works at a venture capital firm, who makes such investments.’

Now, we have our definitions in alignment let’s look at some key steps you can take to optimize YOUR success in 2016 and beyond.

Here are some of the steps that are continuously raised. I have not ranked them in any specific order in this article:

  1. To start with, every VC, Angel or Investor will always ask for some solid reasons and documents to illustrate why you are looking for startup funding, access to more resources, etc. – generally speaking the key elements that they will ask for during the initial ‘courting’ include world-class ideas, plans in a range of documents from initial pitch to Due Diligence and Finalization including:
  • Pitch Presentation
  • Pitch video (this has especially been in vogue the last 3 years)
  • Investor deck with executive summary
  • IM  (Investment Memorandum or also referred to as Information Memorandum)
  • P&L/Financials and that all important…
  • Due Diligence Package that compiles all the necessary legal and acceptance letters
  1. I have found a great basic Pitch Presentation deck usually needs to be 10 -15 pages in length, highlighting key topics like:
  • Company Purpose (e.g. Defining the company/business in a single declarative sentence)
  • WHY (Why you are passionate about the idea/business)
  • Problem (Describe the pain of the customer)
  • Solution (Illustrate or demonstrate your company’s value proposition to make the clients life better)
  • Why Now (Show the historical evolution of category)
  • Market Size (Especially US and Globally)
  • Competition
  • Product /Service
  • Business Model
  • Team /Board / Advisory Board
  • Marketing Plan e.g. executive summary, target market, USP, Pricing, Distribution, Offers, online/offline strategy, etc.
  • Milestones e.g. upcoming milestones will accomplish and timings.
  • Financials/ P&L

Additionally, make sure you have a finely tuned ‘Elevator Pitch’ in hand too. It must cover your key points quickly and succinctly, i.e. what company does, key pain solved, company status, exciting and unique factors. Importantly, always fine tune and adjust based on all VC feedback and comments. Having a Business Plan finalized is vital as discussions progress too.

  1. I have personally found, it is critical to attract ‘rock-star’ Board members and Advisors to ensure success too. The main benefits of having ‘seasoned’ and ‘connected’ Advisors and Directors are:

Screen Shot 2016-03-28 at 3.43.24 PM

  • Network + Access to more connections and capital: successful individuals, advisors often have the ability to invest directly in your company; and/or they tend to have large, high quality networks of individuals they can introduce you to. Likewise the right mentors and advisors can connect you with key strategic partners, employees and customers.
  • Credibility: having quality advisors also gives your company instant Credibility in the eyes of investors, partners, customers, etc.
  • Operational Success + Recruitment: Advisors with whom you can discuss key business matters as you grow your ‘startup’ will help ensure you make the right decisions, particularly if they have encountered and dealt with the same challenges already in their Careers.

 

4. Bottom-line on the actual Presentation Materials you need and must have in order to Raise Venture Capital:

  1. A high concept pitch (Short, succinct and dazzling if possible with a memorable WHY!)
  2. Elevator pitch
  3. Teaser email
  4. Business Plan (including marketing and financial projections)
  5. Executive Summary
  6. Slide Presentation

Screen Shot 2016-03-28 at 3.39.43 PM

I hope this article provides you greater insight into what’s required to start a business (e.g. start-up), grow a business, change the world or innovate and improve your business or non-profit. In future posts, I will be sharing some of the ‘How to” tips and ideas I have learned along the way including:

  • The difference between Venture Capitalists and Angel Investors
  • Dealing with Private Equity Firms
  • Giving up equity in your company
  • What Venture Capitalist want?
  • What Market Sectors Venture Capitalists focus on?
  • Are Unicorns becoming Extinct?
  • How to Create Your List of Potential Venture Capital Firms
  • Factors to Consider when Seeking a Venture Capital Firm

Late last year this was the state of play – Venture capital (VC)-backed companies raised more than US$32 billion in Q2 2015 across 1,819 deals, bringing the total raised by VC-backed companies globally to a staggering $59.8 billion for the first half of 2015, according to Venture Pulse Q2 ’15 the first in a quarterly VC report series from KPMG International and VC data company CB Insights. North America, unsurprisingly, continues to lead global venture capital activity.

Anand Sanwal, CEO of CB Insights New York recently stated:

‘Increasingly, VC-backed companies are staying private longer, and the best companies have a menagerie of funding options. This helped buoy Q2 2015 funding to levels last seen during the dot com era.”

Notably, the strength was global – from Berlin to Bangalore, Silicon Valley to Silicon Alley and the Bay Area to Beijing. While the funding environment is certainly disruptive and frothy, we are seeing start-ups causing massive Paradigm Shifts and rapidly dramatically re-shaping markets ranging from transportation and Internet of Things, on-demand mobile to hospitality to healthcare.”

In conclusion, momentum and consistency are critical during your launch and start-up phase. But to be laser clear and focused remember, that investors care about management, markets & products/service and WHY.  They invest in deals where they can own enough to make it worth their time  – thus “money.” (Usually a minimum of 10X)  And all of this is wrapped up in forward progress that you must demonstrate over time.

Be smart, lead with passion, make great choices, be consistent and always SHOW UP.

Remember, it all begins with passion and compassion!

XXX END

 

More About Geoff De Weaver:

Geoff-56

Hailing originally from New York; Geoff De Weaver  is the globally experienced entrepreneur and marketer, technology disruptor, trend hunter, transformation expert, author, keynote speaker and CEO of Touchpoint Entertainment Inc.

Feel free to get in touch with Geoff for further information:

 

‘When Action Meets Passion and Compassion, Lives Change’ ~ Geoff De Weaver

Comments

comments

Share This Post

NEED TO WIN MORE BUSINESS & GENERATE MORE SALES & REVENUE

Join Geoff’s millions of online subscribers. Get world-class results fast to be more productive, confident and be the next ‘success story’

* indicates required


You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

Geoff De Weaver will use the information you provide on this form to be in touch with you and to provide updates and marketing.