Things to consider before taking in venture capital
Venture capital investments have long played a central role in financing innovative and fast-growing companies. By offering capital in exchange for ownership shares, venture capitalists can give your company the boost it needs to reach your goals, regardless of whether you are in an early stage or already established in the market. It can be an effective strategy for financing growth, but it is not without risks. Here we go through what you need to think about before you take in venture capital investments.
1. Be well prepared
Before a meeting with an investor, there are many aspects that need to be considered and you need to be well prepared to answer questions. Think carefully about what you want with your company. What is your vision, the value-driving factors, your capital requirements, and what will the money be used for? And what are you looking for in an investor, besides the capital?
2. Present your team
Introduce the persons who will drive the success of your business. What are the key factors that will make you successful? What are your collective skills and how do you complement each other, both in terms of knowledge and different driving forces? Be proud of your team and highlight it!
3. Clearly show how the company will become profitable
An investor expects a return on their investment. Therefore, great emphasis should be placed on presenting the company's business model, revenue model, and how you will achieve profitability and profits. Put effort into making different calculations based on the market size scenario and your projected market share. Make a break-even calculation (the point where sales revenue covers all costs) and a forecast of when the company is expected to become profitable. Do not forget to show the realism of your hypothesis, for example based on the market you are targeting and your plan to reach the market.
4. Don't forget the sustainability aspect
It is important to show how your company is contributing to solving the societal challenges we face. Thinking sustainably not only expands your customer reach, but also minimizes risks when regulations are adjusted. A company that is well prepared and has a clear sustainability strategy will be better positioned and will also find it easier to attract external capital as investors increasingly look for sustainable investments.
5. Venture capital is not a walk in the park
Be aware that raising external capital can be a challenging process. Most likely, you will present your company and your business idea and get several no's before you find the right one. A no means continue, not that the business idea is bad. It may be that your business idea is not a perfect match for that particular investor, that the timing is not right, or that the investor lacks sufficient industry knowledge and therefore judges that they cannot contribute enough to the company's development. It may also be that you are too early and that the investor wants to see further evidence of the market potential. Take the feedback and use it for refinement and improvement, and move on to other investors.
Here you can read more about how we can support you with venture capital investments