Step 3: Play the Game
You know why they say business is all about networking? Because of venture capital. These funds, so critical for so many companies, aren’t won with a good proposal. They’re won with a hard-earned introduction, a good proposal, and spectacular networking.
There will be meetings, lunches, dinners, drinks, golf games, and more—you name it, it’s part of how your investors investigate you. They know that if you pay attention and smooth the way for a deal, you’ll be able to use those skills in the rest of your business endeavors.
The Dating Game
If it feels like you see members of the firm more often than your significant other, you may not be wrong. Raising funds is a lot like dating.
First, you have to find someone you’re interested in. Then it’s time to turn on the charm.
But guess what?
Dating goes both ways.
It’s not just about impressing the firm. The right firm will impress you, too, and not just with the size of its portfolio.
What do they have to offer besides money? The right investor will add crucial industry contacts where you need them most. Don’t have a manufacturer or supplier? Find a firm with connections to both. Do you know your industry, but struggle with other things like marketing or research and development? Your ideal match will have experience developing both.
No Blind Dates!
Just like actual dating, you don’t want to sit through an entire dinner just to find out you two have nothing in common. It’s a waste of your and an investor’s time to surface an opportunity they won’t be remotely interested in.
While it might be tempting to play the odds, don’t go after just any old funding. You’ll gain a reputation for not having anything interesting. Plus, if you’re churning out letters and presentations left and right, you’re stretching yourself too thin. Instead, find the VC firm of your dreams and put everything you have into slam-dunking that campaign.
Step 4: Sealing the Deal
You set your sights on raising venture capital for your company. You’ve pored over the research, knocked the presentation out of the park, and wined and dined partners at your dream firm.
How do you know if it’s working?
The Coveted Term Sheet
Most funds get approved at partner meetings. If the partners vote to move forward with funding, you get a document called a term sheet. When you do, read over it like it’s a contract. It’s not a contract and your funding still isn’t guaranteed, but it’s how you’ll know exactly what you’re getting yourself into. These agreements can be complicated and highly nuanced, so have your lawyer go through yours—thoroughly.
You may want to negotiate pieces of the deal. When (or if) you come to an agreement, you need to sign the term sheet. At this time, funding is still not guaranteed until the actual financing documents are drafted and signed.
Just because you’ve gotten a term sheet doesn’t mean it’s a done deal. While you’re in negotiations, continue showing the firm the same attentiveness so they know you’re good with follow-through.
Even after the term sheet is signed, stay with it. Most firms take advantage of the time it takes to draft official documents to conduct another sweep of due diligence. And since you’re a part of that investigation, continue as your wining, dining, meeting-attending self
Quarterly Venture Capital Activity in Canada