New businesses trying to make a jump into the big leagues need the capital necessary to expand and grow. Finding venture capital is the choice for many smaller businesses, with the funding providing both the capital and the guidance for business expansion.
Of course, venture capital firms are extremely picky when it comes to their choices in whom to invest. In a few instances, businesses are awarded venture capital because they are in the right place at the right time. However, most of the time, it is only the most prepared businesses with the right ideas who are successful at finding venture capital.
How do you know if your business is ready for VC funding? Here are three sure signs that venture capital firms may take a look.
1. Organizational Structure
First, venture capital firms are succinctly aware that only businesses who are absolutely solid in their organizational structure will survive. A business organization must consist of experienced management professionals who are all dedicated and enthusiastic about the business product and mission.
An enthusiastic entrepreneur can be the catalyst that flings a great business idea toward success. However, a single leader is not enough. A venture capital firm will only look at businesses that have the right leadership in all areas of the organization, including marketing, sales, production, finance, administration, and overall CEO leadership.
2. Operational Experience
Keep in mind that venture capital firms will likely choose businesses that have some business experience. Only a small number of venture capital dollars go to seed funding. Most venture capital dollars will go to early stage, expansion, or later stage businesses.
You must prove to a venture capital investor that your business is not only set to grow or expand, but that it has the track record to prove the business model.
3. All Documents Prepared
The last sure sign that your company is ready for VC funding is having all the proverbial ducks in a row. All necessary documents must be prepared in excruciating detail. These documents should include:
- Business Plan - Give a complete overview of the business, including mission, product/service detail, leadership details, marketing plan, and pro forma financials.
- Business Model – This is the overall blueprint of how the company will be run. This document shows operational details such as production plans, marketing strategies, financing, etc.
- Business Proposal – This is a brief document that proposes why the business needs venture capital and how it will spend the cash.
- Financial Projections - These are detailed and researched financial figures that show where income is made, and where money is spent, with a goal of increasing net income year by year.
When you have all your t’s crossed and your i’s dotted, then you’ve just worked you way closer to venture capital funding.