Many questions have to be answered by an investor. Some of the most important and those are usually not dominated by the entrepreneur.
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October 21, 2020 4 min read
This article has been translated from our Spanish edition using AI technologies. Errors can occur due to this process.
The opinions expressed by the entrepreneur’s contributors are their own.
- A venture capitalist wants to see how much capital you are raising, how long it will take, and what they will do with it.
- Don’t forget the following questions: What would you need to accomplish the next time you raise capital? Will it be enough for another VC to show interest?
As a rule, prior to an official appointment with a venture capital (VC) investment company, a previous meeting is held with an investor. Even if the first contact is a chance meeting between you, you should be prepared for any kind of question about your project. If for some reason you can’t answer and you think you’re closing the doors, chances are you’re missing out on the opportunity to get a next appointment and, with it, an investment.
Many questions have to be answered by an investor. Some of the most important and those are usually not dominated by the entrepreneur. Some of these are related to the (real) valuation of your company, the amount of money you want to raise and the purpose for which you want to use it, or specific answers to your financial analysis.
There are many things investors look for when reviewing your deck. In addition to knowing your income, margins, and investment costs, you should also be aware of cash-in, cash-out, and company milestones. In short, a venture capitalist wants to see how much capital you’re raising, how long it will take, and what they’re going to do with it. The data that you must provide must be realistic and justified as it is part of the risk an investor takes with you.
Image: NeONBRAND via Unsplash
Cash in
It’s the money you want to raise and your venture capitalist is trying to make it reasonable. To that end, at G2 we recommend asking the following questions: Are you increasing the fair amount of capital in relation to what you want to achieve? In terms of the size of the team? In relation to your needs? We recommend that you think in terms of time periods between 12, 18 or 24 months. Don’t ask for more than you don’t need, implement a solid plan to strategize your business. Generally, these suggestions don’t pass them on to you, just let you know that they are not interested in your business.
Pay off
It basically refers to when your business runs out of money. Generally, you are expected to raise capital for 12, 18, or 24 months. However, if your outlier is much shorter, allow enough time to finish your next round so you don’t run out of money. It is recommended that you do not create a plan that will be funded for more than two years, maybe three years. Investors hope that the capital they bring you bears fruit, as over time the funds will seek a much higher value exit strategy that will produce the expected returns on their once invested funds.
Many VC mutual funds are running a round and will likely turn to you with other funds for subsequent funds. So don’t overlook the following questions: What would you need to accomplish the next time you raise capital? Will it be enough for another VC to show interest? Will the milestones achieved be enough for a VC to pay a higher price in your next round of financing? Have you progressed enough
Creating a capital raising strategy is not an easy task, it requires the accompaniment of an expert who knows how to implement a strategy appropriate to your company’s needs to ensure that your numbers are correct and that they are linked to the mutual funds that are right for you next rounds. May your round of capital raising be flawless!
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