NEWPORT BEACH, Calif. --- California Capital Partners, LLC (CalCap), is the manager of venture capital funds specializing in investing in small- to medium-sized technology-based business with high growth potential.
Understanding the financing challenges of a growing company, CalCap’s managing directors – industry veterans Mark Mansfield, John R. Nelson and Philip B. Smith – have a cumulative 75 years of senior management and investment experience. With the myriad of issues for entrepreneurs to consider, from financial plans to elevator pitches, the 10 tips below will provide even savvy start-ups with some candid, effective insights into what it takes to get venture capital funding.
- To begin with, why venture capital? Because with professional money comes professional help. In addition to strong financing, investments from venture capital firms can provide access to industry experts, valuable guidance, and key relationships.
- Why professionals are investing in your venture. Venture capitalists expect a minimum internal rate of return of 40%. Within five years, venture capitalists should make 5x to 100x their investment.
- Make it short and sweet. With thousands of investment opportunities available to every venture capitalist, an entrepreneur’s elevator pitch should be no more than two to three sentences and should grab an investor’s attention immediately. Entrepreneurs should focus on the validity of the business opportunity instead of the specific details of the technology or service.
- Lost in translation? Give the pitch and presentation to a financial executive (CPA) and a marketing executive. If the ideas are clear and provocative to professionals from very different disciplines, then the pitch is effective.
- Think long and hard about the future. A basic financial plan should include justifiable assumptions and five-year pro forma projections for profits and losses, balance sheets, and cash flows. Venture capitalists will scrutinize every meticulous detail of a financial plan, so the plans must be error-free and thoroughly researched.
- Watch what is spread on the spreadsheet. In addition to preparing basic accounting statements, be sure to track category details over time. These should include projections for revenues from specific sales channels, costs of good sold, head count, salaries, marketing expenses, accounts receivables, and allowances for bad accounts.
- Make it flow. Do not ask for money that is not supported by cash flow projections. Entrepreneurs seeking financing often encounter problems when their future cash flows do not accommodate their planned growth.
- Put your money where your plan is. Venture capitalists are increasingly willing to invest if entrepreneurs also invest their own money.
- Don’t forget to mention . . . Entrepreneurs should not hold back any information from venture capitalists or other financiers. True financing strategies are critical to a company’s growth. If critical elements are omitted or misrepresented, everyone loses.
- What to do with all this money? Entrepreneurs should include a detailed use of proceeds in their plans. If the company’s expense strategy isn’t prepared, the company isn’t ready for significant financing.
As the leadership at CalCap has witnessed over more than 20 years, entrepreneurs equipped with smart strategies, a diligent work ethic, and honest intentions can navigate the venture capital maze and achieve their funding goals.
En route to developing these venture financing tips, CalCap’s managing directors have completed over 300 capital investments, managed over $2 billion in transactions, and consistently produced returns in the top decile of their industry. The firm’s investment activities are located strategically in Los Angeles, Toronto, Silicon Valley, San Diego, New York and Vancouver. More information on CalCap can be found at www.calcappartners.com.
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