Heard of Jim Breyer? No? What about Peter Fenton? No again? Let’s see then-Peter Theil?? To some these names are extremely familiar and to some they do not make a difference. For start-ups looking for funding, these might be very familiar. Peter Theil is the co-founder of PayPal and Facebook’s first investor where as Peter Fenton is the VC that took up Twitter. All of us are not so lucky to find a VC at our doorstep. Start-ups have to go through a great deal of ordeal in financing their venture. Most of the times they end up in the wrong loop, sometimes even at the cost of their stake. 5 Things to look for in Venture Capitalists! In this article is aimed to assist the start-ups while they avail venture capital. These days we are witnessing a spur in the start-up sector pertaining to external sources of funding. Especially by way of venture capital financing and angel investment. So, who are the venture capitalists? What do they actually think? A venture capitalist is an investor who either provides capital to start-ups or small companies who do not have access to public funds. They lend their support in exchange of a fixed percentage of stake in the start-ups equity. The interests of the venture capitalists lie in the massive return on their investments if these companies are a success. Similarly, if these start-ups fail, then they incur huge losses. This is the reason due to which the VCs seek for a hefty stake in the equity. Venture capitalists look for a strong team, a large market with mass appeal and a unique product or service with a strong competitive advantage.  So, are the VCs really smart? Or really they know it all? Absolutely not. It is very much possible that the VCs are completely unaware of the business you are in. Most of the VCs usually hail from banking, finance and such related sectors. Hence, most of them are completely unaware of the intricacies of technical businesses. They, however, know things which can make or break a start-up. They know an agreement in and out. Terms and conditions of an agreement, rights and stakes in a venture, revenue projections, they know it all. Hence, if you are looking for a Venture Capital funding, make sure to brush up the following points while looking for a VC:

1) Connections:

The strength of a VC depends on who he knows. This separated one VC from another. Who they invest with, the professionals they hire, the team they work with defines their success. Most VCs prefer to repeat their partners in success. Hence, if you see your VC repeating its team over and over, then it is a clear winning combination. It is all about who they know.

2) Past Performance:

It is widely argued that a VC always wins, even if the start-up fails. If their investment succeeds, then they get huge percentage of the profits. However, even when their investment fails, they receive huge amount of money by way of salaries, management fees, etc. Hence, while it is a win-win situation for VCs, irrespective of success or failure of the start-ups, you are the one who needs to inspect the past records. All that glitters is not gold. Hence, do not follow the mirage painted by the lores, recommendations, stories. It is very important to check the actual results of their fundings, like the internal rate of return of each and every fund they have raised and the carried rate of interest that investors actually received.

3) Inclination/Orientation: 

Is the firm entrepreneur oriented? Or is it investor oriented? Needless to say, an entrepreneur based VC would have an added advantage for you. However, this should not be the only criteria for choosing your VC, since both the individual biases have their own strengths and weaknesses.

4) General Knowledge:

As mentioned earlier, most VCs are ignorant of the fields of business apart from their own fields. But they should be conversant enough with your business to understand the intrinsic requirements and potential needs of fund infusion. Also, they should be able to judge the prospects of such investment and not just be interested in the stake. There is no deadlier combination then ignorance and arrogance.

5) Professional Ethics:

What does your VC seem more interested in? Just the stake? Or more in your venture? Ethics and Integrity are two of the most important factors in choosing the VC. Nobody wants a cynic who knows the price of everything and value of nothing. These are some of the things that you should look for in a Venture Capitalist. Apart from the above things to look for in VCs, you might have your own individual requirements. Make sure to prepare a proper list of your requisition before you avail the funding. For information on other sources of funding, please visit: Basics of Start-up Funding ___________________________________________________________