David Young is a partner at DLA Piper (http://dlapiper.com/). You can watch more content here on Docstoc.
An important consideration for raising money from venture capitalists is to make sure you are addressing in materials and presentation in a way that highlights your strength.
- Is your management team strong?
- Size of the market. Does your product have potential for a large market?
- What is your company's competitive advantage?
An important consideration when considering raising money from venture capital investors is looking at the key factors that they are going to consider most important in making sure that your company is ready and that you’re addressing those in both materials and your presentation to them in a way that really highlights the strengths.
The most important consideration to any venture capital investor is a management team. Is the management team strong? With early stage companies, that’s the key, and that may impact the timing of when you raise money. If it’s a sole founder, that maybe a reason to wait and supplement the management team before raising money.
Second in consideration is just the size of the market. Is this a big enough market in projections in a fundraising deck? That’s partly the reason why investors, they know that those are made of and they know that you can’t really know what your revenues are going to be in 2015 if you have a startup today. But they can tell whether the market is big enough and if you are able to generate the revenue you think you can if things go well. Is this a big enough market? There are a lot of companies that are trying to raise venture capital financing that are very niche placed. If they do really well and get 30% market share in the market, they’re going to have 10 or 15 million revenue which is not enough. It needs to be where with a small slice of revenue in your market. You can have 40 or 50 million in revenue.
The third most important issue is just competitive advantage. What is the competitive advantage that your company has? Sometimes it’s First Movers, sometimes it’s an electrical company. It can be hosts of things, but you need to have that over your competitors and then we put it all together. What investors want to see is, is this the management team that can take a strong competitive advantage and take advantage of a big market to build a very successful valuable company.