Uber, Airbnb, Snapchat– all byproducts of venture capitalist funding that has fast-tracked these ideas from their dorm dwelling humble beginnings into multi-billion dollar enterprises that have re-engineered the world’s perception on both technology and social media as a whole.
In 2014, venture capital investments peaked at a record $48.3 billion dollars. With nearly half of that funding being used on app startups. While this may seem like a pie that is plenty big enough to supply the entire tech world with at least a small slice of financial stability, the fact of the matter is that fundraising, specifically venture capital, is incredibly hard to secure. Venture capital funding is commonly looked at like blood moons, the Aurora Borealis, or volcanic lightning. In other words, VC funding is on another level of rare. Only 1% of startups actually get VC funding at any given point in time.
To their defense, VC’s are betting dangerously high when not being highly selective with the ventures they decide to invest in. It is crucial for VC’s to view their investments as entirely sound otherwise they risk losing an immense amount of credibility and an immense amount of money. From an outsider’s perspective, investors seem to be the most level headed individuals you will ever come across– poised for success even in the most dire situations while maintaining an emotionless stupor for periods of time that simply seem inhuman. The pressure and uncertainties investors are confronted with day in and day out have helped them develop diamond-like characteristics. Through extensive pressure comes unwavering resiliency. Coupled with both the humanistic and logical ability to look past biases, properly analyze particular factors of a startup’s inception that may sway investors one or way or the other and a comprehension of a founder’s vision/likelihood for success are all facets of the game VC’s must be able to master. And while investors occasionally develop biases for reasons that are often times unavoidable by the entrepreneur currently in the investment spotlight, it is important to be able to do damage control in the most productive way possible.
From the perspective of the entrepreneur, understanding these potential issues or setbacks can be very helpful. According to a write up done by the Harvard Business Review, the three principles to abide by when negotiating with a VC are as follows:
Comprehend the leverage you possess
Maximize trust
Strive for unequivocal understanding
When VC’s are able to identify the entrepreneurs that have successfully built a framework for making decisions and developing lasting relations with both clients and investors alike, it shows. Being able to identify components of the systematic decision process that nearly all VC’s implement will naturally make for less of a hurdle when discussing your vision with the people that can finance your idea long term. Disruptive startups will never run out of opportunities to improve various fields of work for the better, and VC’s know this. Prepare accordingly, be relentless in the pursuit of the most air-tight version of your project conceivable and be ready to neutralize the concerns of the financial gatekeepers in order to see your vision take flight.
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