How To Win VC Funding

BursaSnipers

Publish date: Sun, 11 Aug 2019, 12:08 PM

7 You believe you’ve got a great business idea. It could be the next AmazonAMZN with some financial backing. Now the challenge becomes how do you get a venture capitalist to part with their money?

That’s from Scott Kupor, author of “Secrets Of Sand Hill Road: Venture Capital and How To Get It.” He’s also managing partner of Andreessen Horowitz, a powerhouse venture capital firm.

And Kupor says to increase your odds of getting funded, understand what VCs are looking for.

› Aim sky-high. The “threshold question” for most VCs, Kupor shares, is if your business succeeds, how big can it get? Many investments that VCs make don’t work out “so the few that do need to really work out,” he said.

And VCs are attracted to ideas that could spawn large, standalone public companies.

› Answer “Why you?” Big markets attract lots of competition as others are likely to see the same business opportunity you do, Kupor points out. And the next question VCs tend to ask, he shares, is “why should they back you versus any number of other entrepreneurs who may be going after the same market?”

Prepare for questions like:

What is it that makes you uniquely qualified to win?

Are you an expert in the space?

Have you had some life experience that brought you to the market problem and solution?

› Know your audience. Target the right VCs with your approach, says Derrick Fung. He’s the cofounder and CEO of Drop, a mobile rewards app with more than $31 million in VC funding raised. VC money usually comes after seed funding done by family, friends and Angel investors.

Some VCs will do Series A funding, but not B. And some do only C funding. What is Series A funding? It’s for companies that have demonstrated early signs of a market fit and user potential. Series B rounds encompass funding businesses past the development stage. And Series C rounds are for successful businesses targeting expansion.

“Know what the investors are looking for in each round and be prepared to go deep into each area,” Fung says.

› Choose wisely. Pick your VC partners carefully as best case scenario you are likely going to be together longer than most married couples. And consider the average marriage in the U.S. lasts eight years, and the average publicly traded company takes 10 years to offer its IPO. Ask yourself, Kupor says:

What do you want from a partner, besides capital?

Do they have a particular area of expertise from which you hope to learn?

“Decide what are the most important criteria to you, and pick your partner accordingly,” Kupor says.

› Think ahead. How much money should you ask for? The amount of money you need to be able to make it to a future pitch round, Kupor says, is the right amount of money to raise in your current pitch.

Your current round of VCs care about this, he says, because they know they can’t likely fund your business entirely on their own. They’ll want to envision other VCs helping to fund the next rounds. “They don’t want to get stranded,” Kupor said

› Strive for clarity. Distill your pitch and make it digestible for the VCs, says Jean-Luc Robert, CEO of Kyriba, a cloud platform for CFOs. Kyriba has raised $110 million in venture capital.

“Your message needs to be clear, concise and consistent,” he said. “VCs are constantly getting pitched and you need to stand out in a positive way.”

And put yourself in the shoes of an investor. Ensure you can “clearly articulate the problem you’re addressing. You need to demonstrate your domain expertise to solidify, in their minds, that the problem is real and why you’re the best person to solve it,” Robert said.

› Get personal. Fung recommends founders try to pitch VCs in person and not just send pitch decks in advance.

“Most founders are great at articulating their vision and they will have a higher probability of closing a deal if they can communicate that vision to VCs,” he said.

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