In the USA, only one or two business plans in 100 result in successful financing. And of every 10 investments made, only one or two are successful. But this is enough to recover investments made by the venture capital (VC) in all 10 start-ups in addition to an average 40-50% return! Securing an investment from an institutional venture capital fund is extremely difficult. It is estimated that in the US only five business plans in 100 are viable investment opportunities and only three in 100 result in successful financing. In fact, the odds could be as low as one in 100. More than half of the proposals to venture capitalists are usually rejected after a 20-30 minute scanning, and 25 per cent are discarded after a lengthier review. The remaining 15 per cent are looked at in more detail, but at least 10 per cent of these are dismissed due to irreconcilable flaws in the management team or the business plan.
A Venture Capitalist looks at various aspects before investing in any venture.
A strong management team - each member of the team must have adequate level of skills, commitment and motivation that creates a balance between members in areas such as marketing, finance, and operations, research & development, general management, personnel management, and legal and tax issues.
A viable idea - establish the market for the product or service, why customers will purchase the product, who the ultimate users are, who the competition is, and the projected growth of the industry. Business plan: the plan should concisely describe the nature of the business, the qualifications of the members of the management team, how well the business has performed, and business projections and forecasts.
So while approaching a venture fund one needs to be fully prepared and keep the above requirements in mind while submitting the business plan.
