Professional Documents
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Let’s get right into it. Most people think that raising
capital for a startup is difficult. I think it all depends
on how you look at it.
To make matters worse, the fact is that most entrepreneurs never get their startup capital. It’s a
fact, but not one that can’t be overcome, that’s the difference.
Venture Capitalists like myself are often hesitant to invest and here’s why:
Most businesses don’t have a good execution model or exit strategy. A lot of them look like a
black hole that will continue to burn cash endlessly with no resolve. To keep things simple, an
investor needs to understand where their capital is going, why it’s needed, when it’s coming
back, and when the return is realized.
In fact, an in-depth study in business funding (by venture capital firm Correlation) recently
revealed that some 65% of VC-backed businesses fail to return their capital. So it only stands to
reason then that VCs want to be absolutely sure what they are investing in. But without funding,
most startup founders won’t be able to hire the right employees, finish the product or execute
the marketing strategy.
Fortunately for you, I’ll give you a behind the curtain look at the criteria myself and other
VCs may look for when we invest in startups.
-Marc
1. Your Team
Investors in general get pitched several deals on an
ongoing basis. The startups
that succeed in raising capital are the ones that
have a team that is confident in executing their
business plan.
Bonus tip: VC’s look for teams that put the company first and think long and hard before they
make any decisions that may put the company at risk. De-risking investment capital is the key to
successfully earning the confidence of your investors. Remember, you don’t want your business
to get slaughtered before it even comes out of the gate.
2. Revenue Options
This may seem obvious, but you would be surprised at
how often it is overlooked. Revenue is, after all, the
nucleus of any successful organization. You need to
show how your company is going to survive on a
week-to-week, month-to-month basis. Cashflow is a key
to a company’s ability to continue its day-to-day
operations.
It is best to put all the risks of your business on the table first, and then explain how you plan to
de-risk an investors capital, repatriate the capital and the return.
Once a VC understands the risks and method for the return of capital, they’ll be able to make a
decision on whether or not your business is a good fit for them.
The biggest mistake entrepreneurs make pitching deals is not putting all the risks on the table
first. If a VC wants to go to a casino, that’s where they would be. No business comes without
risk, so understanding risk is very important.
Bonus tip: A good salesman doesn’t need to sell anything at all. They lay the facts out before
the investor, and in great clarity and detail, explain their case. It’s either a fit for the investor, or
it’s not. It’s that simple.
4. The Exit
Before I invest in a deal, I want to know how I’m getting out.
Understanding the exit strategy from the very beginning is
important for an investor and here’s why:
Those are my 4 steps. Follow them, and you’ll be in the best spot to raise money for your
startup. For now, I’ll leave you with two quotes:
“In the game of hockey, if you don’t shoot the puck, you will never score, that’s for certain. So
take the best shot you can, whether you’re standing up or lying down”
“Make sure to follow your dream or spend the rest of your life working for someone else that did”
-Marc Wade
Venture Capitalist
In his free time, Marc surfs, skis, and travels between his family
offices in Toronto, Los Angeles, and Newport Beach. His office’s
primary investments include wine, real estate, technology,
biotechnologies, entertainment, and media.
If you want weekly startup tips like this, follow Marc’s instagram @marcwadeco.