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Meeting With The Venture Capitalist

Written by: Evan Carmichael

Article Overview: Meetings with venture capitalists are also referred to as “the dog & pony show.” It provides the first opportunity for investors to meet the management of your company face to face and assess the people behind the business. You could have a brilliant business plan backed by poor management. This will only become apparent to the venture capitalist in the meeting.

Meeting With The Venture Capitalist

Venture Capital - What Happens In The Meeting

Meetings with venture capitalists are also referred to as “the dog & pony show.” It provides the first opportunity for investors to meet the management of your company face to face and assess the people behind the business. You could have a brilliant business plan backed by poor management. This will only become apparent to the venture capitalist in the meeting.

There is an old British banking expression that asks: “Is someone the horse for the course?” In other words, do you have the right management team for the task at hand. It then follows that different horses are needed for different courses.

The point of this initial meeting is to test the management face to face. The venture capitalist wants to build confidence with the management team.

The intermediary’s prime role is to get a “dog & pony show” together with a number of venture capitalists.

The venture capitalist may question your business plan to test you. Make sure to have someone with you who understands the finances and who knows the product or technology.

The meeting will usually start off with a 5 minute update as to what has happened since you submitted your business plan. The rest of the meeting will be a question and answer session.

People like to do business with people who they have an affinity for. The development of trust between yourself and the investor is paramount. They must get a feeling that they can work with you and that there is positive chemistry.

As an example, an entrepreneur who walks into a meeting dripping in gold, diamonds and flamboyant suits will have a hard time raising capital because the venture capitalists will not feel comfortable with this person.

Venture Capital - Major Questions You Should Be Prepared For

The first meeting is primarily a question and answer session to see if you have the right management team in place. However, the venture capitalist can have specific questions for you to test such things as your technology. They may bring in a technology expert to get further clarification on points made in your business plan.

The venture capitalist can also use this meeting to test you on sensitive areas such as your company valuation and the eventual exit strategy. Investors will not want to go too far down the road with you if you cannot agree to basic terms with them. If you think your company valuation is $100 million and they determine your value to be $20 million, you have a sizable gap that may be too large to close and come to mutually acceptable terms on.

Another potential problem is that if you are wedded to your company and do not ever want to sell, it decreases the likelihood of an investor exit which lowers your chance of receiving the necessary capital you need to grow.

One example from Northern Crown Capital’s experience was when they found a perfect venture capital match for their client but the company’s management started disagreeing in front of the venture capitalists during the meeting. The marketing people were arguing with the research people and the venture capitalist needless to say did not invest.

Venture Capital - Important Business Plan Questions They Will Ask

The main questions about your business plan will surround the assumptions you have made. Mistakes are most often made at the assumption level. Prepare for your assumptions to be tested.

Avoid unstated or assumed assumptions. Make sure to write down every assumption that you have made in your financial projections. This is a critical part of developing the persuasion chain and convincing the venture capitalist to understand your numbers and eventually invest in your company.

Intermediaries such as Northern Crown Capital will ensure that you are ready. They know the questions that are likely to be asked and ensure that you have the right answers memorized before going in. You must be confident when walking in the room and in answering every question if you hope to instill confidence in the venture capitalists.

Venture Capital - Other Information The Venture Capitalist Will Ask For

Venture capitalists will not go into too much detail in the first meeting.

They essentially want to meet your team and assess them. They will then decide if they want to move forward with you or not and begin their due diligence procedure, a process which continues right up until closing day.

Ultimately the potential investors wants to make sure that they clearly understand how your business operates and how your team can work together to fulfill the objectives of the company.

Venture Capital - Length And Objective Of The First Meeting

The first meeting will very rarely last more than an hour. It is really designed solely to understand if you have the “horses for the courses.” This can certainly be understood in that first hour. The due diligence process will then follow.

Your objective is to persuade the venture capitalist to move to the next level.

Venture Capital - How Intermediaries Can Help

Preparing for the meeting is a key role of intermediaries. They will go through a number of rehearsals with you and sit down for several sessions that could last for a couple of hours each to go over the likely questions you will be asked. They will also make sure you have the right answers committed to memory and can back up your assumptions properly.

A successful meeting with venture capitalists will result in good chemistry having been developed early on and at the end of the meeting. The venture capitalists will have openly expressed an interest in moving on and there will be a general level of enthusiasm at the end as supposed to the objective analysis of the business plan which occurs at the beginning of the meeting.

The intermediary knows the venture capitalists and their different accounts. Intermediaries know the sensitive points and help tailor each presentation to the particular venture capitalist. Every venture capitalist will have a different approach and the intermediaries will help you prepare for their potentially hostile questions.

Preparing for the meeting is much like preparing for a case in court. You only have one chance at it and you better do it right!

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  Venture Capital - Preparing The Plan
  Contacting The Venture Capitalist

Article Tags: affinity, answer session, brilliant business, business plan, chemistry, company face, entrepreneur, first meeting, gold diamonds, hard time, horses, management team, pony show, poor management, prime role, question and answer, right management, venture capital, venture capitalist, venture capitalists



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