ARE YOU A VENTURE CAPITAL INVESTMENT CANDIDATE?
Karl Dakin
Capital Coach | Stakeholder Investor Campaigns | Design, Stage, and Manage or Support | Reduce Time, Money, and Risk of Raising Funding | Increase Probability of Success! | Opportunity Management
QUICK CALENDAR
NEXT MONDAY, August 19, Don Cohen show, 9 am MDT, LinkedIn Live – Funding Tips
NEXT TUESDAY, August 20, Successful Funding show, 8 am MDT, LinkedIn Live - TBD
NEXT THURSDAY, August 22, Community Revitalization show, 8 am MDT, LinkedIn Live – Stephen Shaff – Community Engagement
?FUNDING HAPPENINGS
Funding requires business fundamentals.
A current project has a massive market where the government is mandating action and providing incentives to take action. However, realizing a market opportunity requires all the basics of operating a good business: strategy, planning, management team, back office, communications and all necessary resources. Otherwise, its someone else’s market opportunity.
A small business getting started often needs to raise capital to get started. The dollar amount may be small and the ability to attract investment may be limited. However, first dollars in the door represent the foundation of a capital stack. As a foundation, these dollars must be solid and constructed strongly enough to carry the weight of later rounds of funding.
I am encouraging some of my clients to focus more on optimizing their business than on raising funding. Certain actions can be initiated now with little or no risk that it will be a waste of time if funding is not achieved. These actions can add credibility to the business by demonstrating market acceptance, expert endorsement and generating revenue that will help sell the story to investor candidates. These actions are more important than a slick slide deck.?
FUNDING POINT – ARE YOU A VENTURE CAPITAL INVESTMENT CANDIDATE?
?A couple of months ago, on a program allegedly about investment crowdfunding, a young entrepreneur stated that she was not getting any responses from her attempts to obtain money from venture capitalists. I could not reconcile venture capital funding and investment crowdfunding being in the same conversation.?
Although every business startup is a venture, only a fraction of a fraction of a fraction of businesses are true venture capital investment candidates. I have seen statistics that venture capitalists only invest in 1 in 2,500 business deals that they look at. If you also understand that venture capitalists use gatekeepers to avoid looking at deals that never qualify, then you may understand my opinion that only 1 in 25,000 investment opportunities may get venture capital funding.
?A rookie entrepreneur with stars in their eyes and an ego brighter than the sun will assume that venture capitalists need them because their opportunity is so great. With time, you might expect that this assumption would diminish, but I still see older, more veteran entrepreneurs seeking venture capital money, like betting all of their chips in roulette on Red 23.
?I met my first venture capitalist 45 years ago. A small, home-grown venture capital firm with only $50 million under management. Although high risk investments with the hope of super high rewards have been around since the beginning of time, this was my introduction to the venture capital world.
?I can talk about the pros and cons of receiving venture capital investment, however the probability is so low, I will save those thoughts for a valid opportunity.
?Although the definition of venture capital has varied from time to time, the perception is real when viewing venture capitalists who seek investment opportunities that are not only home runs but grand slams.
?I use as my guideline that to qualify for venture capital funding, a business must grow over 100% every year and achieve a valuation of $100 million dollars within five years. Some venture capital firms will add an additional requirement that they will not invest less than a certain dollar amount: $10 million, $25 million, or even $50 million. These dollar amounts reflect the large amount of money under management by the venture capital firm and the limited number of investments that they can make at any one time.
?Venture capitalists will state that they expect 1 in 10 of their investments to be a grand slam – something that will surely get the attention of the media. They expect 2 to 3 of their investments to make a little money and another 2 to three investments to break even and lose money on the rest. The grand slam investment is expected to make enough money to make up for all of the other losses or lower rate of return investments.
?Early in my career, venture capitalists sold off and exited their investments by conducting an initial public offering (IPO). This common exit gave way to a more popular acquisition by an already existing public company. Venture capitalists will view an opportunity from the perspective of whether or not there is a likely buyer for the business in which they invest.
?Venture capitalists have been contrasted with private equity firms who seek to make money on all of their investments. As a result, private equity firms do not need a grand slam investment but still seek home runs. Like venture capitalists, private equity firms are professionally managed with a fiduciary obligation to maximize profits to the investors who place their money in their care.
?I have seen angel investors (wealthy people meeting the SEC definition of ‘accredited investor’) state that they also seek grand slams with 500% growth in 5 years. However, angel investors are individuals, and they each have their own criteria for what represents an investment opportunity worthy of their investment. I have seen angel investors invest in everything and anything. Their goal is to make more money, and they expect every investment they make to appreciate in value. Unlike venture capitalists and private equity firms, angel investors may have little or no training in making investments.
?As a mantra of my ‘Motivated Money’ approach to raising funding where I seek those investor candidates that are most likely to invest. I focus my efforts, offers, and campaigns on those investor candidates. I do not get any gold stars for telling people I pitched a number of venture capitalists on Sandhill Road if I don’t raise any funding. If your venture has grand slam potential, remember that you need to get introduced, and you still are facing heavy competition from other businesses seeking the same funding source.
SUCCESSFUL FUNDING
TUESDAY, Eric Hanson was my guest again on my Successful Funding show. Our topic of conversation was “Getting to Yes.” We discussed how to tip over an investor to provide funding.
You may view a recording of the show at:
You may view recordings of all past Successful Funding shows at my LinkedIn profile under Events:
领英推荐
RCI COMMUNITY FUNDS
As a member of this new company, I am working with a team of professionals to craft a new funding mechanism for revitalizing underserved communities.
YESTERDAY, RCI Community Funds hosted another Community Revitalization show. With Bill Huston and me as hosts, Jeff Dangremond was our guest, and we discussed impact investing in communities. Jeff provided background on the definition of impact investing, a profile of people who act as impact investors, and how investing in communities achieves impact.
You may view a recording of this show at:
AUGUST 22, RCI Community Funds will present the Community Revitalization show with Stephen Shaff of Community Vision as our guest.
You may register to be in the audience on LinkedIn at:
DON COHEN SHOW
MONDAY and WEDNESDAY, I was a guest on Don Cohen’s show, where we started a conversation on tips for obtaining funding that was continued on Wednesday. Don and I shared insights to presenting a business from the perspective of both the entrepreneur and the investor candidate and the need to establish a genuine relationship that would be the foundation for the investment.
You may view a recording of Wednesday’s show at:
You may view a recording of Monday’s show at:
Don is my mentor and guru on using LinkedIn as a social media platform to build my brand and build my community of individuals and organizations who work like me to help small businesses and communities raise funding.
SUBSCRIBE
You may subscribe to this Weekly edition of my Instant Funding Newsletter, or you may subscribe to my Daily edition.
Karl Dakin, the Capital Coach
Dakin Capital LLC
AI Automation Specialist | Web Designer
7 个月Please check your inbox Karl Dakin
Capital Coach | Stakeholder Investor Campaigns | Design, Stage, and Manage or Support | Reduce Time, Money, and Risk of Raising Funding | Increase Probability of Success! | Opportunity Management
7 个月Is your business a grand slam investment opportunity?