What are the common mistakes when approaching Venture Capitalists?

August 15, 2016

As a Corporate Advisory firm, Lexington often sees the simple mistakes businesses make when they are trying to source funding from venture capitalists. One of the most common mistakes is not having a comprehensive and clear business plan.

Here’s a few of the more common slip-ups that businesses make when drafting their business plan:

Hype and assertions

Venture capitalists do not like assertions and hype. Make sure you only state facts and not lose sight of the core objectives of your business.

All things to all people

Investors want to see a focused strategy, but many early stage companies believe that more is better. This is not the case. Venture capitalists want to see a single superior product addressing large, single and growing markets. It is good, however, to illustrate potential spin off opportunities but don’t labour these.

Insufficient competition analysis

A lack of competitor analysis will get a business plan declined; it illustrates that management does not know its market. Venture capitalists will conduct extensive market research in this area. It’s important to have a section in your business plan which showcases the company’s strengths verses competitors. Competition shows that a real market exists.  

Too long / too technical

Investors do not have time to read long business plans. Aim to draft somewhere between 20-30 pages which is kept as simple as possible. If you need to add technical details, this can be documented in separate white papers.

No risk analysis

Any successful business plan will show an understanding of the risks inherent in your business and the steps taken to mitigate these risks

 

All the above mistakes outlined above are simple and avoidable – don’t fall into these simple traps!

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