Is Your Company a Venture Capital Firm Possible Funding Prospect?

Is Your Company a Venture Capital Firm Possible Funding Prospect? By William Cate There are significant differences in the funding policies of individual U.S. Venture Capital Firms. However, almost all Venture Capitalists are seeking the same answers to the following questions. If you are certain that your company meets these requirements, you should give yourself a score of 10 for each positive answer. If you fall somewhere between a "yes" and "no" reply, score your company with a five on that question. If your answer is "no," you should score zero on the question. 1. Is your company a U.S. Domestic Company? If your answer is 'no," but your company is incorporated in Canada or Western Europe, score five. 2. Is your company a public company? If your answer is "yes," score zero. Your company is seeking a merchant banker not a venture capitalist as your funding source. 3. Does your company have a unique technology or service? If your answer is "yes," and you hold a patent, score ten. If the answer is "yes" but there is no patent, score five. 4. Is there a significant and sustainable market for your company's product or service? If you have a good product for a small niche market, score zero. If everyone in the world needs your product or service, score ten 5. Who are your company's potential competitors? If your competitors are major firms and you lack a proprietary edge, score zero. If you are opening a new market and will hold the "first mover" position in that market, score ten. 6. How much money are you seeking in your business plan to take your product or service to market? You should be asking for less than it will take to create initial sales. Most Venture Capital firms will do a secondary and tertiary financing, if they make the initial investment. If you are asking for a million or less for the initial investment, score ten. If your company needs over one million and up to five million score five. Above five million score, you should score zero. 7. Will your product or service sell? Is your product or service meeting a generally acknowledged need? Do you have a distribution network in place? If your answers to each of these two questions are "yes," score ten. Is consumer education required? If "yes" score five. If you don't have a clue about selling your product or service, score zero 8. Will your gross profit be greater than fifty percent? If "yes," you can give yourself a score of ten. If greater than thirty percent score five. Below thirty percent score zero. 9. How much money are you and your management team "at risk" in this company? If you are seriously "at risk" should the company fail, score ten. If you have invested some of your money into the business, score five. 10. Do you and your management team each have a relevant education and work experience in your industry? If your answer is "no" reduce your final score by 33%. If "yes" give yourself ten points. 11. Does your business plan show projected gross revenue of twenty five million dollars in three years and at least fifty million dollars in five years? If you can't reach twenty-five million dollars in three years, score zero and no matter your score above, you are probably wasting your time hunting a Venture Capital Firm. If you have a score of sixty-five or above, you have a reasonable chance of finding the Venture Capitalist of your dreams. If you score below sixty, you should seek money from other than traditional funding sources. If you have the sixty-five score, your business plan must reflect it. Reread your business plan and verify that all your answers are reflected in the text. Verify that you have supplied supporting evidence for each of these questions so that the potential venture capitalist will believe your replies. There is no guarantee that any Venture Capitalist will fund their perfect company. However, the further your company is from perfection, the less likely it is that you will be funded. If you score is below sixty-five, you could beat the odds and get funded. However, you are more likely to be wasting your time and money in searching for your money from any Venture Capital Firm.