Startups seeking financing often start with crowdfunding and seed capital: funds from family, friends, and assets. And while these early investments can raise tens of thousands of dollars, they’re usually only able to hold over a startup from the ideation phase to development stages, which brings us to the next phase in the startup lifecycle: venture capital (VC).
In short, VC is funding given to a startup in exchange for equity in the company. In this context, a growing startup in need of money to help sustain its growth seeks out venture capital investors or firms for funds that will help bring their startup’s goals to life. And unlike the funding acquired in earlier stages, VC funding typically brings in millions of dollars.
These firms can provide capital; strategic assistance; introductions to potential customers, partners, and employees; and much more. However, VC financings are not easy to obtain. Entrepreneurs who are better prepared and acquainted with the process have a higher likelihood of success with investors. To help entrepreneurs better navigate the VC ecosystem, Embroker put together this guide that compares Series A, B and C funding, how to land a warm introduction with a VC, pitch deck best practices and the ins and outs of decoding a series A term sheet.
Tips to Navigate the VC World
Once you’ve made the decision to enter the world of venture capital, there are some important factors that need to be considered.
- How to find the right VCs: Do your research on prospective venture capitalists and their firms. This will not only help you identify competencies and areas of conviction but investments in other competitors. Scanning a VC firm’s portfolio is also a good way to see if the companies they’ve invested in are doing well.
- Now’s the time to network: VCs hate cold emails just like the average person hates cold calls. Instead, take this as an opportunity to network. Get involved in communities on social networking platforms or in person at local meetups.
- Pitch deck best practices: Structure the conversation by bringing multiple presentation formats — a full deck and a “teaser deck.” Ask the investor which deck they’d prefer to hear.