Romance Novels Set In The World Of Business

What Venture Capitalists look for is basically a business plan, tweaked for their purpose (funding).

According to the U.S. Small Business Administration, these are the core components;

Purpose and Objectives

An executive summary of the project with a why funding should be allocated.

Proposed Financing

How much you need throughout the life of the project, where the financing is coming from (debt/equity), how the money will be spent and some solid thinking behind the dollars quoted.

Marketing

Your targeted market segment, its characteristics (including key industry figures), competitive analysis, and how you plan to obtain the market share you’re targeting (with costs)

History of the Firm

Significant milestones (financial and organizational), employee relations, banking arrangements, major services and products offered, awards won, legal issues, etc.

Description of the Product or Service

A description of the product, what it costs, patents involved, key competitive advantage, etc.

Financial Statements

Core statements (balance sheets, income statement, and statement of cash flows) looking both forwards (pro forma) for the next 3-5 years and backwards (the life of the company).
Statements should assume financing is obtained.

Capitalization

A list of shareholders, dollars involved, and in what form (equity/debt).
Clearly outline any associations.

Biographical Sketches

Bios including employment histories and qualifications for key stakeholders

Principal Suppliers and Customers

Outline any suppliers or customers holding a significant percent (I usually use 10% plus) of revenue or costs, include details of any longer term (one year plus) contracts.

Problems Anticipated and Other Pertinent Information

Any lawsuits, labor issues, patent or tax difficulties.

Advantages

What advantages do your project/company hold over others?

What makes your proposal special?

This is the bare minimum required by most venture capitalists.

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“If you are a woman building a company in Silicon Valley, you are statistically more likely to be hit by a venture capitalist than funded by one.”
Linda Hahner, president of San Francisco based Out of the Blue Design.

In 2006, 30% of all businesses were owned by women, female owned business the fastest growing economic trend, yet between 5 to 7% of venture capital is allocated to these businesses. 73% of female founded companies’ growth capital is instead sourced from individuals.

Why?

According to Carol Sands (at the time of the interview, a managing member of a group of professional angel investors), “The real reason why women lag behind men in attracting venture capital dollars is that fewer women actually ask.”

Why don’t we ask, especially since we are more likely than our male counterparts to seek professional advice?

Talking informally to some of my female entrepreneurial buddies, one of the reasons is a lack of understanding about the process. Venture Capital Funding is a mysterious black box right from where to find a venture capital firm (antiventurecapital.com ironically has a great listing ) to the exit strategies venture capital firms normally use.

Fortunately there are some organizations to assist with the funding process. Springboard Enterprises ( http://www.springboardenterprises.org/ ) is a non-profit organization connecting female entrepreneurs with equity capital.

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Entrepreneur Magazine recently interviewed three venture capital firms about what they looked for in a company. 

Ilya Nykin, Prolog managing director:

Nykin was not shy about calling their criteria for funding “stringent.”  ”We were looking for the most breakthrough opportunities that address large unmet needs, that can be brought to market in a reasonable time and for a reasonable investment, and that have some scientific validity.”

Prolog also has a clear idea of the type of leader they prefer.  The entrepreneur should have “experience, energy, foresight, drive and vision.” 

Andrew Lindner, Frontier managing partner:

Securing funding with Frontier is a slow process.  “Our model is to track a company for a while”.  Like most venture capital firms, they also have a tight stage and sector focus.  ”We are a growth-capital provider focused on highly differentiated service businesses in the Southeast and Mid-Atlantic.”

Adrian Smith, Ignition partner:

Smith again stresses a rigorous funding process.  ”It involves the portfolio mix we want to have at Ignition, and [the company] has to meet the business criteria we’re looking for.”  What made them happy about this particular company?  We “were very comfortable that we had a great team going after a large market. We were also able to agree on terms. There’s a lot to negotiate: the amount being raised, options and vesting of those options, liquidation preferences.”

Note the words associated with funding…stringent, rigorous.

Also important is the tight focus of the firms.  Why such a narrow scope? 

Because venture capitalists are active partners.  They believe in the companies they back.  They are involved, often requiring monthly meetings.  They want to contribute more than purely capital.  To do that, they need experience in the industry. 

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