How Venture Capital Broker help founders? – A 5 point Checklist.
A Venture Capital broker can help founders to navigate through every stage of finding and applying for a fundraising– to get the best deal available based on your business circumstances. A VC broker, for example helps you assess your financial situation. Suggest the most suitable investors for your needs. Searching the market to find deals that match your criteria. https://www.entrepreneur.com/businessideas/venture-capital-broker#:~:text=A%20venture%20capital%20broker%20is,start%20or%20expand%20a%20business.
Convenience – venture capital brokers can be very useful if you don’t have a good working knowledge of the finance and investors markets, or don’t have the time to spend searching for deals, doing the paperwork and speaking to investors.
Access – due to their experience and contacts, a venture capital broker will usually have access to a wide range of investors. This means they may have a better chance of finding a deal that fits your criteria.
Expertise – the finance industry can be confusing, and things can change rapidly as interest rates fluctuate and investment deals come and go. Having an expert who can explain things clearly and understands best practice can be invaluable.
The problem facing entrepreneurs
Let’s face it, starting a business can be expensive. Few entrepreneurs have the cash on hand to get the ball rolling without some outside help. If you do decide to seek funding from investors, your next step is to figure out how to draw them in. What is it that makes an investor decide to put money into one business over another?
A small business looking to grow the business, might seek financing through a traditional loan, a micro loan, or cash from your friends and family.
You can also seek funding from investors.
Before approaching investors, it’s important to find out from venture capital brokers about the investment market. It’s important to work with an expert that understands what investors look for in a potential business partnership. Here’s how a venture capital broker can help you to connect investors.
1. PAST PERFORMANCE DATA
A Venture Capital broker will help founders to design performance data through the conversations that will take place between you, the founder and the venture capital broker. More than anything, early-stage business investors want to see a return on their investment (ROI). Through the conversation, a venture capital broker will help to demonstrate that your business will make them money, that you’re 90% of the right choice. The process will require a deep understanding and careful consideration of all the factors necessary to assist the entrepreneur to prepare a perfect performance data for the funding request.
2. A ROCK-SOLID BUSINESS PLAN
A solid business plan demonstrates to investors that you’re serious about your business and that you’ve given thought to your plans to make money. A venture capital broker will help founders to ensure that your business plan alone will be enough to convince investors to back you and offer you funding. The venture broker will use your past performance data to show that you’ve historically succeeded, a business and financial plan will show that you will continue succeeding in the future.
3. UNIQUE IDEA
The venture capital broker will help to present your business as a unique idea that stands out in the market segment. And show why your product or service is different from or better than what your competitors offer. In business terms, this is your “competitive advantage,” also known as your unique selling proposition (USP). It’s what will make you successful over your competitors.
Both investors and the general public get excited about the words “new and innovative.” The bottom line is that if the market is saturated with hundreds of identical products, then your company isn’t likely to be a huge hit.
4. A MARKET FOR YOUR PRODUCT OR SERVICE
The venture capital broker will convey and convince investors that not only is there a big enough market for your product, but that your place in that market is a sure thing. They will prove to investors that the founder’s requested investment capital makes sense. And show that there’s sufficient market size for the business to become a million-dollar company.
5. A STRONG NARRATIVE
Venture capital brokers use their close connections, inside knowledge and expertise of the financial investment market to create a strong narrative that will make an investor choose your project funding. A story that is great and will set the tone and draw your potential investors in.
They know the right story that attracts the right investors in your industry. And equally uses their mutual links and connections to foster and create an atmosphere that the founder’s project will be accepted and welcomed as the best alternative in the market.
How much does a Venture Capital Broker cost?
As you might expect, venture capital broker fees will vary from broker to broker and are influenced by a variety of factors, such as how much you want to borrow. The average cost for a venture capital broker is around USD$1500*, but different brokers can charge in different ways:
A fixed fee – the broker will set a fixed fee to find and arrange an investor for you (which you should always agree in writing before engaging them).
An hourly rate – less common but some brokers do charge by the hour, in which case you should get a written estimate of how long it will take to arrange your project fundraising so you know the likely fee.
On commission – you may see terms like ‘fee free’, but that may mean the venture capital broker is getting commission from the deals. So, it’s important to ask if they work with the investors for your business before you engage them.
As a percentage – where the venture capital broker sets their fee as a percentage of your mortgage, e.g. a 1% fee on a USD$1 million investment capital funding would be $10,000.
You should always make sure you understand what the fees will be and when the broker expects to be paid before you engage them to find you an investor. https://christopheclark.com/