“How to Help Your Client’s Business Win Venture Capital” ( JofA, Feb.01, page 16) is a nice enough list of dos and don’ts, but it misses the main point.
The opening line, “Venture capital is more plentiful than ever” is misleading. While significant sums of money are “in play,” my experience with Silicon Valley venture capitalists has been that it’s extremely difficult to dislodge any investment without overcoming hurdles much higher than they were in the past.
If you are new to the scene, to succeed in getting venture money, your business plan must
Show revenue.
Show signed contracts from real customers.
Demonstrate how your product will clearly solve an identifiable problem or provide real cost savings to businesses (compared to a hot new product or technology that may or may not be needed). As one venture capitalist explained to me, “We want painkillers, not vitamins.”
Last, you need to demonstrate the product or technology can scale to large volumes of business.
If your plan doesn’t have these elements, stick to getting money from friends and family.
Brian Rowbotham, CPA
Rowbotham & Co., LLC
San Francisco