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What do venture capitalists look for in a business plan?

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First of all, what is a venture capitalist?A venture capitalist is an individual who has the money or capital that you as the business owner needs to help get your business going.Venture Capitalists are looking for businesses where they can invest and then see a return on their investment.A venture capitalist does not give money to a business owner without expecting a worthwhile return.So how can you convince a venture capitalist that your company is worth investing in?

The concept seems simple.You need to develop a business plan.In this business plan you need to clearly explain your plan to be successful and make money.Detail is important, unless the venture capitalist can follow your logic and agrees with your philosophies, he is going to take his money elsewhere.Also, you need to make it abundantly clear that now only is your business going to be successful, but that your investors will be handsomely rewarded well above their initial capital investment.Be confident.Show your venture capitalists that you are the kind of person who makes things happen.They need to be confident that they are making the right choice not only in terms of the company but in its entrepreneur (that's you!)

Generically venture capitalists are looking to invest in a company that they are confident will yield them a return on that investment.But what more specifically are they looking for when you present to them your business plan?Here are a few tips of what venture capitalists look for in a business plan:

  1. Is your business right for their firm? - Venture capitalists come in many different shapes and sizes.Make sure that you find a venture firm that is interested in your type of business.Some firms deal exclusively in high-tech innovations others deal with manufacturing companies.Don't waste your time or the firm's time if your interests do not match.
  2. Focus your business plan to your venture capitalists on what you plan to do with the capital requested - Yes statistics and flowery words are nice but make sure you get to the point and address what your potential investors really care about.
  3. Presentation - Most business plans are introduced to venture capitalist in the form of an in person presentation.Make sure that you are adequately prepared for what difficulties a live presentation may present.Most presentations should be limited to an hour or less.Make sure that you leave time for questions at the end of and during the presentation.Be professional and confident as you address difficult comments.You may want to include handouts to visually supplement your explanations.
  4. Include important documents - Your venture capitalists expect to see certain documents in your business plan. Some of these documents are your company's 12-month operating plan, your cash flow projections, a customer reference list, and a current capitalization chart.

Remember that the venture capitalist world is very competitive.You need to do everything in your power to get an edge.Do not be shy about investigating your potential venture capitalist firms.Show interest in them.Make sure that you have researched your market well and are educated and well-informed.Make certain that your business plan is flawless (consulting firms will be happy to help you in these areas).Mistakes in accounting or research can leave your investor with a sour taste in his mouth.Editing your business plan for grammatical errors can not be stressed enough.Sloppiness in overlooking such errors can make the difference between a venture capitalist choosing to invest with you or someone else.Do not give your potential investors any reasons why investing capital in your business would not be in their own best interest.

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