So much is written about how to secure the attention of a venture capital firm: how to write the perfect business plan, how to narrow a VC search, and how to assemble a winning team. However, not enough information exists on how an entrepreneur can dissuade a potential venture capital firm’s backing. To successfully secure venture capital, make sure you do not commit any of the five surefire ways to lose a VC firm’s attention.
1. Big Ego
Let’s face it: entrepreneurs have to be self confident to bring their dreams to fruition. However, having plenty of confidence does not mean growing an ego the size of Texas. Some entrepreneurs actually try to bully VC firms with their presentations, attempting to make the investors feel incompetent if they do not dole out the funds.
It is important to dance the fine line between being confident and egotistical. Letting a big ego rear its ugly head will surely signal to the venture capitalists that conflict could be in the future.
Along with an oversized ego is a trait of inflexibility. VC firms are in the business of lending money and helping new and ongoing businesses succeed. They have the experience to know what business processes may or may not work, and venture capitalists certainly have the right to recommend changes to companies to whom they lend money. An entrepreneur who is unwilling to take direction or suggestion will likely not be on a VC roster.
3. Too Cerebral
It pays to be smart. However, some entrepreneurs focus too much on the intelligence of their business plan theory and not enough on the practical side of business. This sometimes happens to fresh MBA grads that hit the world with degree in hand, but lack the real-life experience to understand the practicality of market theories. Your credentials may all look good on paper, but venture capitalists want to know that an entrepreneur has practical experience and a realistic and flexible outlook.
4. Bad Lineup
Your management team is the group of people who will lead the business to success. They must each have the resume to instill confidence with a venture capital firm who may want to fund your business.
VC firms have revealed that one major faux pas entrepreneurs commit is creating a HR roster filled with family and friends who lack the experience necessary to build a company from the ground up. Be sure that your management team lineup consists of experts in their field, and keep in mind that experience with start-up companies is a great bonus.
5. Too Shy
An entrepreneur with a great business idea will most likely not succeed if he or she cannot effectively promote the idea. Great entrepreneurs have stellar communication skills and can speak directly to a venture capital group about how their business idea will succeed. If you’re the shy type who crumbles under pressure, you might want to hire a PR spokesperson as part of your management team.
Successful entrepreneurs must have a shopping cart full of qualities needed to convince a venture capital firm of their potential success. It’s wise to know your strengths and weaknesses – and a wise entrepreneur will know when and how to make up for weaknesses in front of a VC meeting.