The Beginner’s Guide: the first step towards VC investments

The Beginner’s Guide: the first step towards VC investments

In October 2017, the team of Vimes VC has held Roadshow of Ukrainian startups in London. Ukraine has enormous potential with respect to technical direction, rapidly growing startup-field, and affords excellent opportunities for Western venture capital funds.

All startups participating in Roadshow had an excellent product, powerful teams, but when it came to presentation of such product to investors – some difficulties were arising all of a sudden.

We have gathered here several ideas that will be of great use to startups while preparing for their first meeting with investors.

Goals

It is highly important to have clear understanding of the ultimate goals during the initial preparation. It will be even better if you have them written down.

Imagine that you have 3 minutes only to convey the investor that some characteristics of your product turn it into perfect investment opportunity.

On frequent occasions, CEOs of the companies immerse themselves in technical details of the product and forget or ignore the reasons that make their companies attractive to the investor.

This is where you come to a clear understanding of the goals. You want investment. Investment comes from the investor. Investor wants to know the opportunities he may get. Opportunities shall be concise and understandable. As a result, we get two important assertions that will help you to be prepared for the first presentation:

  • Understanding of investment opportunities that may be offered by you to VC funds.
  • Understanding of what is the best way to present this idea for consideration.

These two main points look rather modest, but they are of prime importance and will save you a great deal of time and effort.

Product

In attempt to describe the product in every possible way and being afraid of missing something significant, the company starts mixing everything it currently has with future developments into one huge pile of “product offering”. But it is often the case that investor is not an expert in this field and does not fully understand for what he is asked to invest his money.

An investor wants to hear what is your project about and how will it generate profit.

Solution to the problem – try to describe the product from investor’s perspective, rather than from the perspective of manufacturer – show what problems does it solve; what is your development stage and when large-scale product will be launched; what are your competitors and what are your obvious advantages over them.

Product differentiation

When this is done, we shall start dig a little deeper. We have already found out what does the product stand for, but what makes it so special and unique? What is the basis of this investment opportunity? What is the “value proposition” for VC funds?

Here are some ideas that you may consider when answering these questions:

  • Unique functions;
  • Intellectual property, patents;
  • Future development plans that help to leave your competitors far behind;
  • Team;
  • Price;
  • Partners and potential interest of major customers.

Audience

In an ideal world, as soon as you have the need for funds, you go directly to the authorized person in VC responsible for the infusion of money in your product. But in fact, you will face with the quest, where you will have to build your cooperation network and develop your working relationship.

Communication tools

Understanding of communication tools that are at your disposal is one of the most important problems.

At a basic level, they may include as follows:

Introductory letter – on numerous occasions this is the first contact with a potential investor. It shall be professional, brief and precise.

Teaser – document 1-2 pages long that is often used to raise interest in your project. It shall be unambiguous, professional, and laconic. The purpose of the teaser is to deliver sufficient information to transfer you to the next investment process stage.

Presentation – as it often happens, perfect product suffers setbacks because of a poor presentation.

Business plan – what is your development plan for the next 2 years? How do you estimate the cost of your company? To where investments will be directed? Sales? Imagine that you have to part with your money – answers to what questions would you want to know before investing?

This is not a complete guide to raise funds from VC. There is no magic in this world, study hard and get ready, meet your failures, and get back to your work with much efforts, grow wiser and achieve your goals!



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