The Truth About Venture Capital

Do's And Don'ts

Venture capitalists aren't untouchable--they're just busy. So send a business plan and cover letter before--or instead of--calling. Don't expect a response. Submit the plan to several firms. If invited to call (or if you must call), keep conversations brief.

In addition to a business plan, be prepared with a business summary focusing on the management team, profit projections, market position and exit strategy. Also put together marketing materials and due diligence analyses on the company, management and industry.

Take these materials--along with your product, if you have one--to your meeting to help the venture capitalist fully understand your product or service. Focus on your business plan. No pie-in-the-sky plans or dreams, no mention of products or services not covered in the business plan.

Don't:

  • expect a response
  • dodge questions
  • give vague answers
  • hide significant problems
  • expect immediate decisions
  • fixate on pricing
  • embellish facts or projections
  • bring your lawyer

Do:

  • prepare all materials before soliciting any firms
  • send a business plan and cover letter first
  • solicit several firms
  • keep phone conversations brief
  • remain positive and enthusiastic about your company, product, service
  • know your minimum deal and walk away if necessary
  • negotiate a deal you can live with
  • investigate the venture capitalist's previous deals and current portfolio structure

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This article was originally published in the February 2000 print edition of Entrepreneur with the headline: The Truth About Venture Capital.

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