One of the biggest challenges that small business owners face is finding financing to support their business concept. Whether in a startup, expansion or IPO phase, sufficient funding is a frequent concern of owners and managers of all forms and sizes of businesses. Often creative individuals do not have the capital to fund a business, and do not know where to look to find additional sources. Armed with the right resources, however, small businesses can achieve the desired potential. For some businesses, the funding question can be answered by venture capital (VC) firms. Other web sites address the types of businesses that are best suited for VC funding. This site makes the assumption that the industry and business fits the desired template for VC funding.

So then the question becomes: "What is the secret to attracting venture capital funding?" Unfortunately, there is no simple answer to this question. In most cases, successfully finding VC financing is more difficult than thinking up a million-dollar business idea. Indeed, finding VC funding requires patience, diligence and a good deal of luck.

This web site is designed to assist small business owners and potential entrepreneurs in their quest to find VC funding for their business. The contents of this page will focus on the components of a successful business plan and how to create one. Listed below are some additional sites that offer information and advice on how to prepare a business plan and presentation, and how to effectively gain the attention of VC investors. After reading the discussion below, these sites should be visited to further explore the resources available for an entrepreneur seeking VC investors.

VC firms review hundreds of business plans for every one that ultimately gets funded. Some statistics indicate that well over 95% of all unsolicited business plans are discarded without review or consideration.

So, if the market for VC funds is really this competitive, what can be dome to improve the chance of success? VC firms usually look for a specific type of presentation from soliciting businesses. Generally, these presentations include the following.

1. Executive Summary - 3-5 pages containing highlights of the project
2. Business Plan - up to 50 pages with detailed discussion of the project
3. Due Diligence Material - Market studies, research papers, patents, etc.
4. Business Valuations - Financial analysis including valuation of the company before and after the VC investment and including projections of exit strategy and terminal value for investors
5. Deal Structure - Explanation of proposed exit strategy with likelihood of success

The Executive Summary needs to be a dynamic and abbreviated presentation of the information contained in the business plan. It should be to the point and free of too much detail. Often, the only document VC investors read before making a preliminary decision on an opportunity is the Executive Summary, so it needs to quickly capture and hold the interest of the reader.

In general, the Executive Summary should contain brief descriptions of the following topics: the company, the company’s mission, products and services, marketing and sales strategy, the competition, the target market, management, operations, stage of development, financial data, and the level funds requested. It needs to place emphasis on the relevant strengths of management, the market opportunity, and the long-term viability of the business.

The Business Plan is where the topics listed above are developed in much greater detail. Each of the above topics must be carefully and thoughtfully researched, considered and discussed. In addition, great care must be given to the development of the financial projections included in the Business Plan. It is typical for a VC investor to immediately flip to the financial section of the Business Plan first. Principally, the investor wants to know the answer to the following questions.

1. How much can I make? What are the expected returns?
2. How much can I lose? How much am I putting at risk?
3. How and when do I get my money out? What are the risks involved in my exit scenario?
4. Can I get at least a 10 times ROI in 5 to 7 years?

In addition, the investor is concerned with the ability and reputation of the management of the company. Again, the investor typically wants the answer to specific types of questions such as:

1. Can the team maintain a sustained effort?
2. Does the team have extensive market familiarity?
3. Is the entrepreneur a leader?

If the Investor finds answers that are satisfactory to these questions, he or she will then read the remaining section of the Business Plan. During this review, the Investor is concerned with myriad other questions such as:

1. Who says this thing will work?
2. Who else is in the deal? Who am I sharing profits, loss, risks and management with?
3. How big is the market, and how will the company reach its intended clients?

The manner in which these questions are answered will determine the likelihood of gaining and interview with the VC Investor.

If the Business Plan is a success, a VC Investor will want to be convinced that the strategy for the business is viable. To support the plan, entrepreneurs need to perform some due diligence and prepare the results for presentation to the VC firms. Due Diligence material often includes feasibility studies, market studies, market research, demographic data, surveys, patents, etc. The more of this type of information that can be accumulated to support the business plan, the higher the likelihood of successful funding.

This is the financial nuts and bolts of the deal as far as the VC investor is concerned. The business valuation needs to include a valuation of the business before and after investment as well as projections and exit strategy valuations. Investors are very concerned about how long their investment will be tied up and what the exit strategy will be. The Valuations should include sensitivity analyses and what-if scenarios so that the Investor fully understands the risk of the investment.

In this section, the investors need to gain a full understanding of what the exit strategy is for their investment. In addition to an explanation of the proposed exit strategy, the likelihood of success needs to be contemplated. Furthermore, additional exit strategies may be discussed as well as fall back plans in the event that the first strategy falls through. The focus of this section should be an effort to convince an investor that a viable exit strategy exists in one form or another.