I have recently read an article by Mark Suster (the 2x entrepreneur who has gone to the Dark Side of VC) on bothsidesofthetable where he said he was often asked by people about how they could get into VC. His response was always “there is no easy path”. Suster believes that getting into venture capital is rather a combination of luck, relationships and timing. He adds that, most of the times, these jobs aren’t even publicized.

Regarding the successful candidate, Mark Suster states that there is no “exact” specification that could be given to anybody. In his opinion, the successful candidate could come from a wide variety of backgrounds. However, he also mentions that, at the highest level, what they are looking for is a ”really intelligent, digitally native, financially numerate and interested in startups” individual. This person should have graduated from a top university with very good grades and test scores.Would you match this description?

Why should the suitable candidate be an excellent graduate, a truly exceptional individual? It is, according to Suster, because they get flooded with an enormous volume of emails from potential candidates, most of them showing discipline and intelligence, also having worked for a reputable firm or having done something innovative or, at least, very interesting in a startup company. There need to be some filters for the extremely large number of candidates who want to work in venture capital firms.

What other features are valuable and would increase your chances to start a career in venture capital? Well, Suster is very clear about the age of candidates, stating that they should have graduated only 2 years before the recruitment period. He adds that professionals having graduated 7 years before are also considered, but people with 10+ years experience are not fit for the role.

Other important features of prospective VC professionals are the readiness, the willingness and the ability ”to debate tech”. That means they should be able to speculate on the future of social media, digital television or mobile computing. People with strong interest in the financial services practice area are also welcome, Suster says.

You can find out more information about the features of the ideal candidate on http://www.bothsidesofthetable.com/.

That is a good question and it may be frequently asked by young entrepreneurs, who probably believe that the best funding source is a bank. Some would think that sticking to what they’ve got, that is, personal savings and, possibly, money from their family is enough. It may be enough to start a business, but what about developing it, that is, implementing the strategies you have detailed in your business plan? Think big, your business may not be the next Google, but you don’t want to be a nobody in the crowd or even go bankrupt in about a year or so, just because your financial projections have been inaccurate.

What are the Advantages of Venture Capital?

Bank loans are important, but what if you can’t afford one? Risks are quite high, especially in the case of start-ups, that’s why these kind of loans are hard to get, if not impossible, especially considering the current state of economy. A start-up has no financial history, there are no figures that could prove the return on investment. However, a business investor or a venture capital firm would be open to funding start-ups as well. Of course, they will ask for a considerable ROI in exchange for the money provided, but they will also help you with management assistance and will use their expertise gained from working with other companies in their portfolio to guide you through the complicated business process.

Can You Benefit from VC Money?

Yes, you can. If you have a great business vision that you would passionately share, if you are motivated, open to challenges and down-to-earth. Venture capitalists want to see your business get off the ground, so what you need to do is prove that you and your team have the capacity, the necessary skills and knowledge to transform an idea into a real venture. The proof for that is in the quality of your business plan and in the persuading executive summary. You may have already finished your business plan and you could be on your way to receiving capital, as there will always be business funding sources for committed entrepreneurs!

Stage preference

Traditionally, venture capitalists prefer to invest in mature companies, as they often provide a minimum amount of $3 million. For start-ups angel investors are a more suitable source of capital. However, things seem to have changed in recent years, the roles of VCs and angels being more flexible, with more VCs deciding to also fund early-stage ventures and angels taking part in more rounds of investment. To increase your chances of receiving capital, contact only investors that have already put their money in companies at a similar stage of development as yours.

Industry preference

Surveys show that investors have had a preference for biotechnology, web, health-care or media start-ups. If you have a business idea that is related to a sector other than the ones mentioned above, you should not give up. There is a wide range of industries that have received funds from VCs, what matters most is that you check their investment history and select investors with portfolios that include ventures in the same field as the one you are going to deal in.

Geographic Location

As venture capital firms provide both capital and management assistance and advice, being thus valuable business partners, the most advantageous deal will be a partnership with a firm that has had large exposure to investments in your geographical area. Besides possessing very useful knowledge about the local market, VCs will also be able to help you solve various problems as they occur, making face-to-face meetings possible.

Besides considering the above detailed criteria, an entrepreneur should pay attention to the content and structure of the business plan, to the quality of the executive summary and should also exercise in order to improve presentation skills for pitching venture capitalists . Investors need to see a clear vision of the business sector, realistic financial projections and excellent execution abilities that will ensure a high return on investment.

You decide to raise capital for your start-up. Before you contact potential business investors, there are some steps you are supposed to follow, to make sure you have high chances to get the funds you need.

First of all, write your business plan. Secondly, at the end of the planning process, also write an executive summary. Then use a database of venture capital firms to select only the ones suitable for your business. What does “suitable” mean? It means they have experience in your field, that is, other successful companies in their investment portfolio, they are geographically located within 100 miles from your offices and can be actively implied in assisting your management team whenever necessary. The next step is to contact them, either by phone or email, or get introduced by a common acquaintance.

What are you going to write in your email? This is going to be your first contact with the business investor and you will either make VCs interested and open the gate for a face-to-face meeting, or they will lose patience or get bored after the very first lines and delete it. Business investors receive an enormous number of emails asking for capital and most of them are simply not convincing. What makes the difference?

What really makes the difference is your ability to attract their curiosity and make them foresee high chances of getting good returns on their possible investment. How can you do that? First carefully write the subject of your teaser email, it is the first thing they see and it has to stand out of the rest of their inbox emails. What about the content and layout of your email? Make it look professional. Let them know what industry you are in, why you think you are suitable for this business –mention your business execution qualities and clearly state why investors are going to have a high return on investment. Use correct spelling and punctuation and review it a few times before sending it. Don’t reveal any figures or details about the business development process yet.

What comes next if your email is successful? Preparing the pitch.

Global Clean Tech investments have increased with 65% in 2010, according to The CleanTech Group.  Despite concerns referring to sustainability of the global financial recovery, investments in clean tech have continued this year. Regarding venture capital investments by technology sector, the largest transactions were in solar – $811 million and 26 deals, biofuels, smart grid and energy efficiency. The world region that is on top of clean tech investments is North America, which accounted for 72% of the total, followed by Europe/Israel, China and India.

Developing innovative business models, that will also be capital efficient, not requiring  huge capital outlays, is the new trend in clean tech. The point is to obtain the lowest product cost to achieve manufacturing scale , without involving billion dollar factories. Vertical integration also reduces cost and moderates risks, facilitating  project financing (see Siemens acquisition of Solel Solar Systems in 2009). What clean energy companies are supposed to prove to be successful are innovative approaches, technology, excellent management teams, strong customer orientation and acceptance, business models that are capital-efficient.

Hopefully this emphasis on environmental technology will mean – for the near future – pushing companies to a more efficient use of resources, in order to boost their performance, an accelerated pace for acquisitions and consolidations, a shift to acquaculture for a more sustainable agriculture.  Since 2005, venture capital firms have invested  around $20 million in green start-ups  focusing on solar, smart grid and EV infrastructure, green buildings and lighting, biochemicals and biofuels, cleaner coal and geothermal energy, green IT.

Maybe it is true Middle East has very few things in common with the other countries of the world in terms of economical interdependency. Now things are surely changing and emerging markets offer great potential for investors, whether they are venture capitalists or angel investors. In case entrepreneurs are in search of funding in the Middle East, they need a “local touch”, that meaning somebody with the same language and cultural background, who will be able to provide capital and expertise as well. Read the full article here: vc firms and funds in the Middle East.

In the Tel-Aviv Startup Weekend (July 14-16), an excellent example of believing in the power of entrepreneurship, 56 ideas were pitched and 16 selected to form teams. Some of the most interesting ideas were Play Outside, Doctor Web or World Tour Guide and you can check the other ideas here: http://tel-aviv.startupweekend.org/2010/07/14/56-ideas-pitched-16-selected-to-form-teams/

A good article on this topic, meaningfully called Peace through Entrepreneurship, can be read here:http://www.womenentrepreneur.com/2010/07/peace-through-entrepreneurship.html. The author mentioned that the key to world peace is entrepreneurship. Coming-up with a new idea and starting a company that will make this idea a success means adding value to your society.

Nothing can be easier than writing tips and advice. Taking them into consideration when you want to start your own business, being realistic, objective and prepared to learn from your own mistakes is much more difficult, as the unexpected can be anywhere, anytime.

Seventy percent of start-up businesses are said to survive at least two years, and less than fifty percent – four years or more.  The problem is that a significant percentage fail. According to Wikipedia, some businesses fail early on as a result of wars, recessions, high taxation, high interest rates, excessive regulations, management decisions, insufficient marketing, inability to compete with other similar businesses, or a lack of interest from the public in the business’s offerings. We have detailed here some important key factors for a company’s downfall and disregarding them would surely lead to closing down your business.

1. Insufficient operating capital

Underestimating the amount of funds needed for the start-up, as well as for the subsequent stages of development is one of the factors of failure. If you don’t have enough money, an angel investor or a venture capitalist could be the solution.

2. A low-quality business plan

It is impossible to start a business without a strategic, methodical plan. This means a very detailed description of the entrepreneur’s vision and goals, a listing of potential problems and the solution to them, an examination of work force needs, a sales and expenses forecast and a careful and thorough analysis of competitors. As the market is continuously changing, you will also need to keep your plan updated.

3. Lack of management experience

Poor management can cause your downfall. If you are the manager of your own company, then you need updated knowledge of finance, purchasing, buying, production, as well as expertise. If you lack management ability, you can hire an experienced manager with strategic thinking, who should be a skilled leader, risk-oriented, able to find solutions in times of crisis and inclined to search for challenges.

4. Bad location

Unless you do some research to locate potential customers and existing competitors, as well as to check the accessibility of the place (car parking, proper lighting), you may end up in a bad location that would affect your sales and even spell disaster to your company.

5. Over-expansion

Confusing success with how fast you can actually expand your business could lead you to bankruptcy. Once you have a good cash flow and a solid customer base, you can  focus on the growth of your company, with careful review, research and analysis.

6. Sloppy marketing activities

Not using constant advertising may lead to losing business to the competitors who do. A small business should have at least a professional well-designed website. It’s the easiest way for your potential customers to find out the features of your product or service and how it can fulfill their needs.

7. Wrong reasons to start-up

If you are driven by the passion to succeed, if you have a positive attitude and ability to withstand challenges and learn from mistakes, if you believe in the benefits of what you are going to sell and you can get along with very different types of individuals, then you’ll have a good chance at entrepreneurial success. The wrong reasons to start your own business are doing it only for making a lot of money, having more free time or being independent.

It is true that even some of the best planned and prepared businesses still fail, but you should be honest to yourself and to the others, know your limitations and be prepared for very different situations. Studying other companies’ success, identifying role models and networking with other business professionals will also make you feel able to face the biggest challenges.

“There are three ingredients in the good life: learning, earning and yearning.”
Christopher Morley

Are you a tech entrepreneur? Do you work in healthcare or biotech industry? Are you an angel investor eager to see innovative ideas get off the ground? Or a venture capitalist ready to provide second round financing to a successful business? Whether you are a creative young businessman or businesswoman in search for funds to develop a start-up company or an investor in search of entrepreneurs with innovative ideas, this blog will be the gate to and from venture capitalism.

We’ll keep you in touch with the latest global business news commented from both sides of the table.

Here you’ll find and read articles about how to develop business plans, how to find the right private investor or how to raise capital.

We’ll also provide you with all the information you need about the venture capital financing process, from the seed to the pre-public stage.

For those about to read, we salute you!

The VC Team.