Raising funds is the most crucial part for a startup. In old times fundraising consisted mostly of asking for donations on the street or at people’s doors but now-a-days this is not at all the case. Adding to it, the most difficult part is to find the right VC who happens to invest in your company.
Warren Buffett, has a simple saying,“If I cannot understand it, I will not invest in it.” But what about an entrepreneur? Doesn’t this statement stand true on both sides of the table? For a VC, examining every factor related to finance is a valuable asset that’s why they have millions of questions to ask a startup when it comes to investing. But you also have a fair chance to do just as much digging as they do. Venture capital comes with heavy costs. You are surely giving up a large part of your ownership in your company. Thus, an entrepreneur should be equally attentive and careful while they allow someone to invest in their startup.
Here is a small quick list of questions that you can actually put in your gun to shoot while deciding the investors for your startup.
Ask the VC About The Fund
The basic profile of the fund and the current number of investments that have been made through the fund are the important things that an entrepreneur must know. After the due course of time your business would definitely have expansion plans, so it is important to understand the fit of the fund in your business.
It is essential to know the level of flexibility of the firms with their investments because it decides how they are going to work with you and whether they will want to make an investment in your company or not.
Ask the VC About The Deal Flow
The compatibility of deals of both the parties is equally important. The average size of an investment by the management and the leverage brought to the investments are some aspects to be considered.
Ask the VC About The Funding Process
It is advisable to know the relevant experience of the team you are about to work with. It is also advisable to know if there are any investments done by the firm that has any negative relation with your business. So raise different questions regarding these aspects and answer theirs too.
Ask the VC About The Structure
The structure of their investments is also a prime aspect to be considered before handing over the remote of your company’s funding in someone else’s hands because the financial and legal structure of the deal is always complex and is usually designed to minimize the risk of the VC.
Ask the VC About The Value Addition
The ultimate goal of a business is to grow so one must keep in mind what growth opportunities does a VC bring and to what extent it is going to work because it is not only about the money the VC brings in but also about the expansion the money is going to bring to your company. So do not worry to shoot few more questions from your gun because after all it is your company!
See you in comments!
Saraswati Singh
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