Venture Financing: The Key Documents
To Be Prepared By the Entrepreneur
The five
sets of things venture capital investors look for in a
start-up are:
1.a
large, rapidly expanding market
2.people
/ management that can get the job done
3.a
brilliant idea of technology that can be commercialized
4.a
strategy that has a strong sustainable competitive
advantage
5.a
reasonable price per share
Basic
Elements of a Good Deal
(Source:
Venture Planning Associates)
Six
basic elements that will entice an investor to take a
serious look at your project are:
ØDo
I like the feel of this project, its market area, and
its management team?
ØWill
I get my capital back off the top? (hopefully not off
the bottom)
ØIs
there a big upside potential? Stock conversions,
possible IPO, early payouts?
ØWhat
assurances will I have that the business plan will be
followed and can be executed?
ØHow
will I be involved? Director, consultant, officer,
employee?
ØWhat
other opportunities are there available that is better
than this one?
Critical Deal Criteria
ØEarly investor return of capital.
ØPremium paid for the risks involved.
ØKickers
or other incentives not necessarily monetary in nature.
ØOptions
to increase equity share or liquidate early.
ØTax
and legal considerations including state securities
laws.
ØIs
the entrepreneur being adequately compensated
