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Venture capital firms

For your next round of finance, you may have to deal with the venture capital firms (or venture capitalist). But remember one thing- never wait to approach a venture capital firm till you have finished the initial funding. VCs (Venture Capitalist) are slow in deciding and they make take months before deciding on your company. So, start approaching VCs, before you end up your initial money from the angels. You cannot negotiate with a VC when you are running short of cash and has no cash to run the business.

Now, when you are dealing the VCs, you will need to be cautious. You get more funds from VCs, usually in millions. Such deals take time, reduce your stocks in the company and may have several conditions. So, be careful while dealing with them and accepting any proposal.

In some cases, the VCs want a new CEO from their side by claiming that you need someone with experience and maturity who is from business field. This is true for some businesses, but that does not mean you cannot create a successful business because you are not from the business field. Bill Gates had no business background and experience and was young when he started and you can see that he has done well! Experienced, aged people with a business background do not always help the business succeed. And one more thing such experienced businessman can ruin the business as well as can through the founders out of the company after some time.

Such so called experienced people with business background wear nice suits, speaks in a very confident tone but most of them do not know what exactly the product is or what is the technology all about. So if you have to have a CEO who do not understand the technology and you are a technology company, then probably the best thing to save your *** is to avoid such VC funding.

Sometimes it may be possible to avoid VC funding and run your startup with the angel money. If it is possible to run the startup just with the angel money then do so. If it is not possible, then look out for a good deal from the VCs.

Going public

Whether you should go public or not? Big question.

Going public is a state that comes after sometime, once you do well and establish your startup. Though there are startups that went public at their initial stage only. It all depends on what you think. Going public again means having someone who does not understand the business yet speaks as if he does and act as a newscaster. You do not need someone who can talk the “Wall Street Language” but knows nothing about your business.

Negotiating with the VCs

While negotiating with a VC, please remember that you have more leverage. This is because there are hundreds of VCs available. And most important thing- “The dollar they pay is the same dollar”.

 It’s a seller’s market and there are so many good deals chasing good startups. Think of VCs as they are in a pyramid. All the VCs taken together form a pyramid. At the top you will find popular and big VCs and as they come down gradually you will see hundreds of other VCs. So, if you do not make it with the top ones go to others in the next level who are not so known.

While dealing with VCs be careful as they may be all claims of connection and experience only. Be skeptical about such VCs who claim to have connections and experience but no money. Such advice and connections may be very costly to you. A VC should be the source of money for you and you should be more concerned about the best deal with more money. 

What and how much to tell the VC?

How much and what you should tell your VC. You should be careful while talking to them as they may also be funding your competitors. So balance it- do not be too much secretive but also do not tell them everything. Vcs say they are more interested in the people and not the idea and so hey want to talk to you. If you know what you are doing and can show that then you should not have any problem keeping some secrets away from them.

The secret is –
TALK TO MANY VCs.

Talk to different VCs even when you do not need their money. This is helpful in the long run because-

1. VCs may have other connections and that may help you later while dealing with other people, selling your startup and so on
2. Your talk to them may stop the fund to your competitor which is very much beneficial for your business.
3. In future business operations VCs who are impressed by you may help you

Where do you find VCs?

In most of the conferences organized for the startups. Visit such conferences and present your ideas. It may help you in future if not now.

More to come

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