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1-Page Summary of Venture Deals

Overview

Every year, there are many start-ups that get started all across the world. Many of them are internet driven and innovative. The opportunities for success in the tech world today are enormous, and so is the potential for profits.

However, the risks are equally as huge: most start-ups fail, which means that time spent on an unsuccessful launch is wasted.

One of the major reasons why start-ups fail is because they can’t get enough funding. Banks won’t usually lend money to these businesses, so this article will show you how to raise venture capital and bypass banks altogether.

In this article, you will learn how to find the right investor for your business and convince him that investing in your company is a good idea.

After reading this, you’ll know that a good lawyer isn’t necessarily the most thorough. You’ll also understand why it’s better to listen first and talk second. Furthermore, you’ll learn how knowing an investor’s vacation schedule can help get a better deal on your investment.

Big Idea #1: Venture deals are the perfect form of finance for start-ups.

Start-ups often need money to get started, and venture capitalists are one way of getting that money. However, not all companies can afford this option because it’s expensive.

When entrepreneurs raise venture capital, they receive an influx of cash from a VC in exchange for shares over the their companies.

Innovative companies with risky ideas can benefit from venture capital funding, because it is uncommon and therefore more effective than traditional forms of financing.

Start-ups don’t have a long history of credit, so they can’t get loans from banks. Venture capital doesn’t require the company to be established, which is perfect for start-ups. Even some of today’s largest companies got their first investments from venture capitalists. Google, for example, received $100,000 in 2000 and then another $25 million one year later. Those huge injections of cash allowed the company to expand quickly enough that it now has its own venture capital arm to invest in other new businesses.

Venture capital is complicated because it involves different people with different goals. Companies can raise multiple rounds of financing, but this comes at a cost.

It’s quite common for companies to be financed by multiple investors, which in turn means dealing with multiple shareholders. Their interests and influence don’t always align.

For example, some shareholders want to make a profit quickly and thus push for risky strategies. Others play it safe and push for long-term gains.

Big Idea #2: There are many people involved in venture deals; always focus on the investors.

When trying to get a venture deal, you have to consider that there are more people involved in the process than just the entrepreneur and investor. A venture deal involves lawyers, mentors, advisors and other parties as well. However, regardless of how many people are involved in negotiations for a potential investment, entrepreneurs should always focus on investors (the VCs). Investors must take into account their firm’s needs when making decisions about investments. Thus it’s important for entrepreneurs to know where an investor is positioned within his or her company before negotiating with them. For instance if an associate or analyst expresses interest in your business idea it might not be sincere because they’re required by their job description to scout out hundreds of potential investments every day; therefore you want to bypass them and reach general partners who can make decisions without having too many other factors influencing their decision-making process.