Anyone working a job understands earning a paycheck is the same as making a living, but when you're an entrepreneur starting out to raise capital for your business, your chances are limited!

There are steps to this process where the number one to remember is the competitiveness! Venture capital groups and individuals receive hundreds and thousands of projects annually only to invest in a small fraction of them. Typically, 95% will honor a review before being tossed in the trash. What's left will have another chance for a closer look while only 1/4 will ever be considered.

Why does this happen? What can a person do to better his/her chances of getting capital for their new or existing business?

Find a referral. Look for someone who can guide you right to reputable venture capital firms. Plan on setting aside some time to do this carefully. Contact your own CPA or one that you trust. Politely tell them in short about your project and ask if they can recommend any venture capitalist.

A good referral is worth more than you think, here's why...

It doesn't matter which CPA, attorney, business owner, media contact makes the referral, if your proposal is unsolicited then prepare for no response. Your contact with the principle at the firm must capture their attention with a precise business plan and proposal - with NO mistakes. 

In todays investment world, venture capitalists want an executive summary when they make contact with you. The complete outline of the business plan must show your ability to manage the financials, provide 5 year cash flow, and provide a skilled management team. You must show that you're in control and willing to work along side the senior consultants who will ensure that your needs are met and the work delivered to your satisfaction.

Venture capitalists are different than hard money lenders or angel investors - they demand the entrepreneur's characteristics meet their expectations. Getting your project to fit their profile depends on the following:

- Private equity market.
- Return on investment requirements.
- Management experience
- 5 year projected budget.

Business Plans - The Holy Grail of Venture Capitalist

A business plan is not a business proposal. There's a difference between the two. Your business plan is your documented map, while a proposal persuades. It incorporates a benefit statement into the description as quickly as possible - something that the decision maker cares about.

It is essential your business plan includes:

The Executive Summary - the most important document for explaining your project to the lender. The document is prepared by the principal. This is a synopsis of your project. You tell the reader what you are trying to accomplish, how you will accomplish it, what is needed to accomplish it and how you will exit the project. What you are trying to accomplish, and why this is a great idea. 

The Company Summary - provide a brief overview of the principal and history, Background on the principal(s), a brief bio. This applies to anyone with ownership of 10% or more, company Locations and facilities. Access, Distance from Airport and regular flights, other surrounding developments, survey and topo maps accomplished, nearest town. If the property is not owned, is it optioned, optioned with the amount of the deposit or under contract with the amount of the deposit. 

Products and Services - spell out a detailed description on competitive comparison with sales literature, sourcing, technology, and any future products or services. Who is doing something similar, include numbers, and why is what you are doing better.

Market Analysis Summary - flyers, ads, internet, sales office, realtors, letters of interest, leases, presales, contracts etc. What has been done and/or what will be done to establish market segmentation, target market strategy, seeds, trends growth, and industry analysis.

Strategy and Implementation Summary - create graphs, charts, tables & visuals incorporated into high value propositions for a better competitive edge. Have a well planned marketing and sales strategy. Tell how your sales forecast is derived from programs with strategic alliances. Explain what milestones are possible. 

Management Summary - layout your organizational structure. List the names and titles of the development team. Include development ownership, attorney, CPA, brokers, marketing team, consultants, architects, planners, engineers etc.

Financial Plan (5 yr), be firm about your important assumptions and disclose any and all other information that may be pertinent to the transaction. Give key financial indicators on what are the risks to the lender and the project. There is always a risk! Negative factors for the principals with credit, foreclosures, bankruptcy, etc. Generally called Skeletons in the industry and must be addressed by giving a break-even analysis, projected profit and loss, Cash Flow and balance sheet.

Writing a business plan is vital for securing financing, and It helps you plan for success by providing a foundation for expansion. If a venture capitalist can see value in your project, then you've generated value out of nothing but a simple thought. In other words, you may see your project worth $50 million while they see it only $10 million.

Although raising venture capital is not appropriate for many young companies, negotiating with their own return requirements is based upon the risk of the investment, maturity of the company, has management experience with a proven product or service and can demonstrate sales. Those who meet these requirements will find that venture capitalists are very patient investors who are extremely familiar with the challenges of building a business and are prepared to provide ongoing financial support in the future. They have experience in funding small to large businesses is why they add value to any entrepreneurial management team.

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