Get to Know Your VC
In this economic climate, it’s tempting to work with just about any venture capitalist who’s willing to give you the money your business needs. Lending is tight and eager investors are hard to find–we get that. What we suggest, however, is to know the person who is about to become a critical part of your business operations. Chris Talis, CPA and senior partner at Hedgerow, a consulting firm for mergers, acquisitions and businesses in Teaneck, N.J., started and capitalized many start-up companies in the last 15 years. Here’s his take on what you need to know about your VC:

Know their industry focus. VCs tend to invest in an industry that they have had experience in–it’s something they will look to leverage when investing in an opportunity.

Know their recent investments. In other words, check their references and find out if their clients are happy with the relationship.

Know how the investment will be structured. What are the terms and equity requirements? How will voting rights be addressed? Will a dividend be required?

Know what “extras” they can offer you. Find out if your VC has valuable contacts, like lawyers, accountants and bankers. Ask existing clients questions to determine if the VC will support you financially when difficult situations arise.

Know their personality (and like it). Issues will arise. Make sure you can productively talk to and work with your VC.

• Ask if they specialize. If you’re buying a franchise, you need a franchise lawyer. If you’re starting a coffee shop, ask what other small businesses they’ve represented.
  
• Ask their prices. And know what’s included.
  
• Ask for references. Mike Drumm, attorney for Snell & Wilmer, a full-service business law firm with eight offices in the western U.S., says to make sure the attorney gives practical solutions and does not overlawyer.
  
• Ask if they have time for you. Your time is crucial. Make sure they will be responsive to your needs.

• Make sure the franchisor has passion for the product and company.
  
• Make sure the franchisor owns and operates a franchise unit. This is important to Williams because it shows that the franchisor believes in the system.
  
• Make sure the franchisor is trustworthy and reliable. The best way to do this: Talk to the franchisees.
  
• Make sure there is a strong infrastructure and a turnkey operation.
  
• Make sure the partnership is genuine. To Williams, that means the franchisor and the franchisees all work together to improve the system as a whole.

Knowledge of your business. No amount of web-design savvy will lead to a productive site if the designer doesn’t know anything about your particular business.

Knowledge about marketing. According to Bugarski, this is the single most important aspect of building an effective website. The designer should conduct a discovery process to get to know your business and marketing objectives, and the site should help fulfill these objectives.

Knowledge about lead generation. Overall, the web designer should have the technical knowledge of how to create a website and how to execute the site to fulfill the business’s marketing and sales objectives. If you’re going to rely on your site for a substantial number of leads, the designer needs to understand how to drive that kind of traffic.

• Be a good communicator.
  
• Be ready to work (all the time).
  
• Be cognizant of your roles. “Understand what each partner’s main focus is,” says Scott, who takes care of the technical, financial and legal matters, while Friedman specializes in the overall direction of the company, marketing and menu planning.
  
• Be passionate about what you do.