The topic today will help startups have a common sight in how to be successful with VCs, and understand how they work to prepare to woo them.
Most founders simply think that VC investments are the highways to success. However, getting about who raises money is likely more important than just basically focusing on how to raise. These are some essential norms that startups should know before signing an investment contract with VC. Make sure you all know how to find a good VC.
Find VC in terms of prevalence
Basing on a top-five VC firm can bring many benefits and guarantee security to a startup. In fact, a VC without much popularity is not necessarily a bad VC, but a VC at the top tier is likely to be a VC with more potential to help businesses grow. However, don’t forget to search more about the VCs unknown, because perhaps one of them would become the ‘good buddy’ of your startup.
Looking for an ideal investment partner
The ideal investment partner is someone that’s completely aligned with your best interests.
Specifically, that means finding a VC with deep expertise in the market you’re targeting, and a financial model that can benefit from a company like yours. As part of the process, you must also make sure you have a good working relationship with the particular individuals who will oversee the investment.
Check out the firm’s past deals
Another way to understand VCs is to research and review their past deals. VC firms are transparent about the types of investments they make, so do your research upfront to find out if your company fits with a VC’s investment ethos.
There are three main metrics to evaluate here:
- The track record for providing follow-up funding and participating in follow-up rounds
- Successful exits (of the type you are hoping to shoot for)
- Reputation for treating their founders well
The other option is finding a business similar to yours that is funded, and figuring out which company invested in it.
One of the most crucial things which could open up the potential and fuel startups is finding a capital partner that trusts in what you are doing, and the mission can make a massive difference.
What financial stage are you in? Before adding a VC firm to your target list, make sure it is actively pursuing deals in your period.
Understanding the taste of VCs is not difficult because most of them share their investment characteristics or criteria on the company’s website. You can search about their:
- Stage investment: What stage they want to invest in? Whether it fits your condition right now?
- Ticket size: How much money do they use in a single investment?
- Partners: Who are their target partners?
- Team members: Who are their team members? Are they experts in VC and startup experiences?
- Deal numbers: How many deals did they get in the past? How many are successful?
- Deal flow: Is that deal flow good enough for your startup?
Then, create a list of VCs that are likely to be interested in the type of deals you’re offering in terms of industry and product. Look for companies that have a track record of investing in your industry and have funded companies that are similar to yours in terms of revenue growth and product focus.
Once you’re sure of the VC taste that’s right for your business, look for a specific alignment between your company’s goals and theirs.
Do they agree on the brand, scale, and timeline with you? How long before they need to deliver those huge results to their investors? How much pressure will you have to produce fast at all costs?
The balance between autonomy and usability
Last but not least, people usually forget to balance the two countervailing. In fact, it’s a big deal when looking directly at the situation that the founders put together a growth strategy for your startup including a specific amount of funding to be raised to facilitate that growth. You have your own ideas and expect everything to follow your decisions. Nevertheless, once VCs are involved, startups must be required to share the power to make important decisions in exchange for capital and help from VCs on many fronts to successfully exit.
Therefore, founders will have two countervailing influences:
1) On the one hand, you probably want as much autonomy as possible. It’s great that the board looks at you and listens to your call to come out and overcome challenges.
2) On the other hand, you also want a partner who is always ready to advise you when you need it but not deep too hard on your management.
So to raise the development of your business, the founders should balance autonomy in management and usability with VC’ helps.
Take a shortcut
As I have shared, startups totally can follow these above steps to find good VCs for their business. However, it will lose startups much time, and honestly, it’s not easy to reach a VC as saying. So that startups should find a ‘bridge’, as Wiziin, which could help you to take a shortcut in hunting VC trips.
Wiziin is a company that professionally connects VCs to startups through its own data collection. Startups can more easily reach VCs through Wiziin’s introduction. Moreover, Wiziin will let advice and support startups pitching successfully to VCs. And startups can save time to focus on raising their projects.