I discuss in detail factors to preparing for and understanding what motivates and the priorities for a Venture Capital firm. Many factors and most are misunderstood, so I explain and outline these common factors to getting a deal.
We discuss this and other business strategy topics and pressing issues facing Entrepreneurs, Executives, and Small Business Owners.
Bryan Smeltzer's The Visionary Chronicles Podcast on driving your brand, product, and marketing through an innovation driven mindset and disruptive strategies.
In looking at the factors and misconceptions behind why some companies get funded, while others get left behind with no avenue to attaining the funding, they feel they need or deserve.
In having done many deals, predominantly with visionary entrepreneurs, start-ups, and mid-tier companies, I have found several factors to why some were able to gain interest, get a meeting, and finally culminate in funding. This EPISODE follows a previous PODCAST: "Start-up | How to Pitch your Company," and now this extends beyond pitching to finding a VC and getting funded.
Most questions I receive with the companies we work with are how to locate a VC firm, what their priorities are, where they find deals, and when I will receive a term sheet. There are many points of contact, but I have broken these into five areas of focus when dealing with VC firms;
1. The HUNT; finding deal flow.
- Predominantly most deals are found through their Network, Investors, or other Entrepreneurs. 34% of Deal Flow.
- From References, over 20% of Deal Flow happens in this avenue.
- From Pitches, although many Entrepreneurs think this is the avenue, it is the path least traveled. 10% of Deal Flow.
2. The ODDS; the funnel.
- 100 Opportunities.
- Twenty-eight get a meeting.
- Ten get an internal meeting.
- Five go on to Due Diligence. e. 1-2 get a Term Sheet.
3. The CLOSE; deal timeline.
- Due Diligence; 120 hours, on average.
- Close; 90-120 days, on average.
4. The FACTORS; most important to VCs.
- Founders/Team; 95%
- Business Plan/Opportunity; 75%
- Market Size/Exit; 70%
- Industry; 30%
- Valuation; low point on the totem pole, valuation determined upon exit, and multiple dollar to dollar investment. IRR vs. DCF analysis.
5. The DEAL; after close value.
- Guidance; 90%
- Investor flow; 70%
- Connections; 65% d. Operations; 60%
- Board; 55%
As you can see, this is very definitive guide can change relative to the deal flow, opportunity, and other factors.
Although not an exact science, hopefully this gives you a very good indicator of what is on a Venture Capital firm's radar, and the best chances you may have for striking interest, and hopefully a Term Sheet.