One thing I’ve noticed in my several months of researching entrepreneurship is that a ton of entrepreneurs fund their projects through bootstrapping. This is basically where the person borrows money from friends, family, and anyone else who’s willing to throw them some funding without expecting a heavy ROI.
So, what about Venture Capitalists? How can an aspiring entrepreneur get money from them?
I was able to listen to five very experienced entrepreneurs judge several different business plans last Friday. It was for an event called “Venture Adventure,” where investors reviewed students’ business plans, gave them feedback, and the winners got prize money. Because I was keeping track of time for the judges, they let me sit in on their discussions. They were all filled with years of wisdom, so I took a lot of notes on how they were judging the applicants. Without further ado, here are my notes on…How to Get Money from VC’s
- Provide a story, prove you have an opportunity (not a product, not an improvement), then tell them how you’ll deliver.
- Show that you have a sincere (and healthy) passion for your idea.
- Explain why your idea hasn’t already been done. You aren’t the first to think of this. There might be a reason your idea isn’t on the marketplace.
- Establish credibility by doing independent/primary market research.
- Explain how you plan on delivering your product/service to the customer.
- Know what differentiates you from the competition.
- Consider ALL costs, including salaries, office supplies, etc.
- Be modest. If you’re a 20-year old sophomore in college, don’t tell the investors you’re going to be the CEO. You don’t have experience. Say you’ll be hiring one instead.
- Don’t tell investors that part of your exit strategy is through an IPO (initial public offering). These are rare, and most investors view this as a cop out. It’s better to say you’ll be working towards being acquired.
- Never promise to give a return on the money you’ve borrowed. You’re liable to get sued that way. Instead, offer the investors a solid set of milestones you plan on achieving. Also, know what a safe harbor is.