VC 101 – A Primer on Seeking Funds for your Business!

For the Budding Entrepreneurs out there:

In any Industry there are both Good and Not So Good Players. And Funding Companies/Investors/VCs Community are not an exception.

You should know to separate the wheat from the chaff.

I am saying this from my own recent personal experience.

Ideas are Important. Without ideas, money can get nowhere. I repeat that: “Without ideas, money can get nowhere.”

So, do not under estimate your ideas. Do not undersell your idea or yourself. This is the KEY TO SUCCESS.

The Good VCs have an established process to apply. You can visit their websites to know more. You can do your homework on what kind of companies they have invested in, how those companies have performed and grown etc. You will know whether you are in good company or not, even before you start the application process.

Some VCs like Y Combinator [ http://www.ycombinator.com/ ] have mentioned the list of companies they have invested in, the companies that have failed or closed down etc. The fact that Y Combinator has mentioned their failed ventures shows they are also susceptible to failures but that does not make them any less. The fact still remains that they have succeeded in most ventures. Some of them have grown to become world class companies.

In the urge to get things off the ground quickly, do not rush the process. Instead stay put for the long haul, be firm on your ideas, thought process, business plans, goals etc. If not now, you will get to work with someone of your caliber soon. Wait for the right partner.

Before talking to VCs, you should:

1. Do your homework
2. Know their Fund Size, Frequency, No of ventures they will invest in a year, Funding Calendar
3. Know the ventures they have invested in, so far & how they are performing
4. Know their Industry standing & ranking
5. Know their application process
6. Talk to some of the ventures they have invested in
7. Know their funding patterns – Seed Stage & Startup/Early Stage – $500,000 to $2 million, Series A – $2 million to $15 million, Series B – $7 million to $10 million, Series C – Post Revenue – hundreds of millions – used for acquisition of other companies in the same space etc.
8. Where they have invested – is it ecom/food delivery/fitness or is there no such preference
9. Qualifying criteria
10. Last but not the least: Talk to a lawyer, get an NDA [Non-Disclosure Agreement] template drafted. This needs to be signed by the VC and you on a Stamp Paper when you want to share the idea with your VC as part of their application process. Most Professionally run VCs will agree and sign these NDAs. If they don’t, then it may be time for you to walk out. Hence, do this first, in the process, so that you don’t waste your time.

I am sure this post will serve as an eye-opener to the budding VCs as well. And I wish they too grow and become world class.

Happy Creating!!

Get in touch with me for Start-up Consulting at:
kannan at zignalytics dot com or call me at 984 555 7401.

Best Wishes,
Kannan