4 BIG Secrets to Raising Venture Capital

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Every entrepreneur dreams of rocketing to success with the help of a million-dollar investment from a venture capital firm.

Just as athletes dream of Olympic Gold and climbers pine to scale Mt. Everest, entrepreneurs will always strive to attract Venture Capital dollars.

I’ve helped dozens of entrepreneurs raise millions of dollars of venture capital and along the way I’ve discovered a few secrets.  So if you find yourself dreaming of venture capital, dream big and follow these simple rules:

1. Spot the BIG Trends

Venture capitalists succeed by staying ahead of the curve.  The nature of their business demands that they invest in markets and industries that are rapidly expanding. If you are not in today’s hot markets, its unlikely you will get the attention of these professional investors.

Sure, technology firms make good venture investments, but those in the fastest-growing markets like mobile computing, alternative energy or biotechnology will have an even better chance of attracting attention.  Industries that are in vogue with VC change however, so be vigilant.  Keep an eye out for the big trends that will shape your market and align your business to take advantage of those trends.

There’s a bonus to this strategy…  Even if a venture fund never comes your way, this strategy can pay off in faster growth.  So keep the wind at your back and your eye on the horizon.

2. Target a BIG Market

Being part of a big trend should point you toward some big market opportunities.  To justify a VC investment you’ll need to show lots of sales in a short time.  There’s no way to do that without selling into a large, growing market.

How Big? Most VC will tell you up front that a $100 million dollar market is not big enough to justify their investment. If you’re looking to grow your business rapidly with venture money, remember this: it’s easier to launch a big ship in a vast ocean than in a backyard swimming pool.  (PS: For more on how to find the size of your market, check out my post “How Big Can Your Biz Be?”.)

3. Make a BIG Difference

The most “fundable” companies will not only be different from their competition, but they will also be fundamentally different kinds of businesses. Starbucks was unlike any coffee company the US had ever seen.  Amazon, eBay and Netflix created fundamentally new business models. And FedEx radically changed package delivery.

Each of these businesses took familiar products – coffee, books, movies, etc.  – and made a big difference in how they were sold or delivered.  So while consumer acceptance was not assured, each company captured the imagination of investors by unlocking new ways of looking at old businesses.  You should do the same.

4. Think BIG, but Start Small

Rome was not built in a day…and neither are relationships with investors.  Start your search for an investor with just a few prospects.  Learn everything you can about them.  And then approach each one individually, with caution and respect.

Remember, before they give you a big chunk of change, busy investors will afford you only a small amount of time.  Be courteous by preparing several bite-sized pieces of information about your company.  (Drop me a line if you’d like to see the one-page Investment Summary I wrote that raised more than $2 million!)

Start with a short “elevator pitch” – a 30 second sound bite about your market and the problem your company solves.  If that gets their attention, follow-up with a small executive summary – 1 or 2 pages that describes your strategic approach and the key strengths of your company.

Finally, be ready to follow-up with a brief business plan – say 25 pages of details about your market, management, and momentum – and a short PowerPoint presentation that encapsulates all the reasons why an investment in your company will make everybody rich.

I’ve seen these 4 rules used successfully over and over.  In fact, no successful entrepreneur I know has ever raised venture capital without following all 4 of these rules.

Now its YOUR turn.  If you’d like to learn more about VC funding, or have a story to share with us about VC, please take a moment to comment below.  I’ll reply personally to each comment… and hope to see you here again tomorrow for another discussion on business finance.

Dedicated to your (VC-Sized) profits,


PS: Don’t forget to become a member… when you join, you’ll receive my free 27-page report on venture capital and the other great ways to raise the money you need to grow your business.

  1. David,

    Like you, I have raised 10s of millions of dollars over the past 5 years.

    With that said, I am very concerned about VC money and in fact the VC industry at this point in the economic cycle.

    The VCs, for the part, that are investing these days, are in investing in their existing portfolio companies and/or later stage deals. They are taking significantly less risk and many are not even deploying funds and/or closing their doors.

    If they are investing in early stage companies, it is usually related to the 4 criteria that you laid out, but typically includes a fifth, which is a management team with a track record or an entrepreneur who is at least known to the VC.

    I would advise companies that have good technology and answer your critieria to also look at strategic partnerships (distribution, joint product development and M & A). I have done some deals here that are more attractive than VC $ and also lead to an exit. Also, depending upon the capital needed, I would advise companies to pursue angel funding as an option.

    Thank you.

    • Great point Michael!

      Venture capital is never the easiest, cheapest. or fastest way to fund a business. And its not for everybody. Still, I never tell an entrepreneur to “fuhgeddaboudit” if they really want to raise venture money. Its difficult and it goes in cycles, but if you’re going to do it you’ve got to follow their rules… including, as you say, #5: Prove Your Mettle!

      Thanks for stopping by and commenting. Always great to hear from you!

  2. David,
    I would love to talk to you because I am in the middle of upgrading my website and turning it into a membership site. Also I could use additional funding to grow it faster. Please feel free to call me at 214-XXX-XXXX to discuss and if you want to join my network my e-mail for linkedin is XXX@hotmail.com.

    Eben Dennis

    • Thanks Eben:
      Glad you found me and hope I can be of help. Plans for rapid growth are the easiest to get funded, and I look forward to our off-line discussions.
      To your profits!

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