John Mihell on securing venture funding
John Mihell of Finance Wales looks at how you can maximise your
chances of securing venture backing when VC houses reject many of
the plans they recieve.
It is clearly a matter of trying to differientiate your
opportunity and a deeper understanding of who you're pitching to
could just give you the edge.
Treat the VC house as a customer
Your initial relationship with the VC house is one of customer
and supplier. Initially, you’re trying to sell a potential investor
shares in your company, but beyond that you’ll need to prove you
can sell other things in the future - your company’s products, or
perhaps even your company when the time is right. This is a great
opportunity for you to demonstrate that you’re sales savvy and
It may seem odd to be thinking of your exit strategy at the
start of a long-term investment, but for investors, this really is
one of their principal concerns. Demonstrate that you have a
clear idea of your exit strategy and be able to answer questions
from the start. This will give you a strong advantage over
companies with a less specific view:
- To whom
- When and why?
VCs will also be impressed if you can demonstrate that you
understand what drives your potential market(s) as opposed to
simply demonstrating how good your product is.
Investment is for the long term
Once you’ve secured investment, it’s likely to take you a while
to achieve your goals and you’re going to spend a lot of time
working with your VC backer(s). It’s important to build a positive
working relationship that’s capable of withstanding the pressures
growing businesses face.
Understand the decision-making process
Whilst they like to give the impression they relish risk taking,
VC houses can often appear quite risk averse. They’re quite relaxed
if they decline ‘backable’ opportunities that go on to be fantastic
investments for others. Conversely, they’re less relaxed when one
of their investments fails or doesn’t achieve its anticipated
return. Understanding this can help you present / sell your
Once you’ve convinced them of the potential upside your
opportunity offers them, it’s crucial you convince them that you
know how to manage/mitigate the associated risk in delivering
growth. “When you’re seeking funding, remembering the old adage
‘people buy from people’ could pay real dividends. VCs want to have
a sensible, long-term relationship with you to ensure their
investment is successful. Convincing them that they can work with
you to achieve this may just give your opportunity the edge!
This article first appeared in Spinout UK's Quarterly Journal 3