Like HowStuffWorks on Facebook!

How Start-up Capital Works

Selling Your Idea

Venture capitalists review around 100 business plans each week, and eventually invest in about five to 10 businesses per year. That means you have to knock their socks off with your business plan just to get a meeting. One of the primary things they're going to look at is your management team. They will only invest in companies they feel have a management team with the experience to make the business work. Relevant experience is very important for your top players. So you may want to rethink your cousin Louie's token position on your board of directors.

Once you've gotten a VC's attention, how do you present your idea? First, write out a brief presentation of your business idea in terms anyone will understand. Don't think using buzz words and technical language will buy you any points with VCs. Explain the following:

  1. The product or service
  2. Who your target market is and specifically who your customers will be
  3. What your product is costing you to produce
  4. What price you are selling your product for
  5. How many units you will sell in the first year
  6. When your company will be profitable
  7. What your long-term growth plans are
  8. What your exit strategy is
  9. How much money you need
  10. How you will spend the money

Have a short version (often referred to as the "elevator" version), and a longer 15- to 20-minute version. If possible, have a PowerPoint presentation and a printed version so you'll be prepared for any situation or need. Make your presentation look professional but not showy. Make sure it paints a clear and concise picture of your business and captures the essence of what you are trying to achieve. Be prepared to answer any question they can throw at you. Don't guess your way through it, and don't sound like you're guessing your way through it. Have the facts and figures (especially financial data) to back up what you're saying, and be confident.