Q&A: Venture capitalists' pet hates
Article Date: Mar 09 2006Q: What are the main pet hates I should know about when approaching venture capitalists for funding?
Answered by Phil Verity, Mazars
Persuading investors to part with their cash requires guts, gall and a bit of good luck, but it's all too easy to misjudge your audience and fall flat. The top five pet hates venture capitalists experience include;
Bluff and pretence - venture capitalists hate it when you start to use technical language, but it's clear that you don't understand what you are talking about.
Crazy claims - when someone comes into a meeting and insists their business can cure cancer or AIDS, they immediately think you are a crackpot.
Poor presentation - don't try and put too much information on each slide of your presentation and don't have too many slides. Investors won't concentrate if the presentation is too long - around 20 to 30 minutes is more than enough to explain most businesses. Make sure the font is clear and legible.
Ridiculous valuations - be realistic about the value of your business. It's common for business owners to believe their company is worth more than investors think it is. The danger is that if you have an inflated view of your company's value, it could deter potential investors before they have even looked at the business properly. Make sure you justify your valuation to the investors and show good financial information in your presentation.
Unworkable ideas - when approaching venture capitalists make sure your idea is realistic and you are approaching the right backer. Many venture capitalists are sector specialists, so don't try to raise money from a technology fund when you run a food business. Also it's no good approaching a venture capitalist for £10 million investment when they never invest more than £2 million.
Phil Verity is a partner at Mazars, the international accounting and business advisory firm, and head of the mid corporate market business line. Phil works with a wide variety of entrepreneurial and owner-managed businesses, helping them tackle the challenges of growth and development. He frequently advises companies on issues such as business strategy, financial management and control, mergers and acquisitions, succession and overseas expansion.
Phil is right but there is more to the challenge of raising investment than he is willing to face: what of the attitude of the, so called, 'Venture Capitilists'? In the main they are not entrepreneurs, they tend not to be risk takers and tend to be greedy, usually accountants, risk averse, lacking in imagination and usually want something for nothing. The Americans recognise that historical failure is sometimes necessary when seeking success - UK VC's lack that element of imagination. Alan J Ford.
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