When it comes to venture capital, there is no formula to guarantee success. It’s important to understand that every company and every venture capital firm is different. Moreover, most companies face issues and challenges that can only be overcome through perseverance, resolve and creativity, no matter how large their funding.
However, there are a few elements that are considered basic to attracting venture capital, and you just can’t ignore them. Most venture capital firms either intuitively or expressly address these requirements whenever they evaluate a business plan for potential investment. Here are a few tips to help you attract capital investment for your business.
Explain Your Future Prospects
When you are trying to attract more investors, it is important to become your company’s fortune teller. Most investors and equity firms like a business with an amazing idea. However, they like it more when you have a clear understanding of where the idea is going. It’s important to have a clear road map for the project, even when it’s in the development stages.
As a business owner, you need to know how your business model will turn out in the future. You need to estimate your project’s growth in the next 5 years. Investors understand that you can’t just predict the future or understand market fluctuations. However, when you have a bold plan for the future, it shows investors that you’ve considered your product past the ideation stage.
Protect Certain Aspects of Your Company
It’s important to take some measures to protect your company’s intellectual property. Every business owner knows about patents in today’s age. However, it can be something as simple as asking your investor to sign a basic confidentiality agreement while pitching your business idea. This will make the investors understand that their investment will be secure with your company.
Depending on the business idea or product, you may to take out some patents. Patent trolls are still very much alive. These are small time companies that file large numbers of patents to hit other business owners with high licensing fees.
Some investors may in fact be primarily looking to invest in your company because of its intellectual property, beyond your current product applications.
Keep Detailed Accounting Records
It’s important to have sound accounting records of your company. You should be actively seeking information on any potential problems in your business on a frequent basis. It is important to make sure you don’t hide anything that could come out later when seeking venture capital. Every investor expects to see your accounting books, and they are experts in finding out your secrets. You don’t want an unexpected financial flaw to spoil your potential deal.
Seeking capital for your new business can be a time consuming and long process. In most cases, the success of your project depends on whether the idea has the potential to grow and expand.
With the three important tips discussed above, you can help secure interest in your business from venture capital investors. These tips will allow your business idea to grow and attract venture capital required to make your business flourish. Seeking help from a financial planner is also advised in any fundraising endeavor.