Venture capitalists invested $2.5 billion in Canadian companies in 2002. What’s more, they brought centuries of management experience, deep industry expertise and countless contacts to the boardroom tables of growth companies across Canada. Think your firm deserves a piece of that action? First, you’ll have to perform the rare feat of attracting a VC’s attention. Brad Ashley, a managing partner with Toronto-based PRIVEQ Capital Funds and chairman of the Canadian Venture Capital Association (CVCA), explains how to get your foot in the door.
Knowledge is power
You’re destined to be ignored if you approach the wrong type of VC company. They tend to deal in very specific fields — IT, telecom, biotechnology. Once you’ve narrowed it down, make sure you fit within an individual firm’s “investment parameters,” including location, amount of capital sought and stage of development. You can find this information at the CVCA website.
Hire a middleman
Smooth out the process by hiring a corporate finance specialist, or a business broker. The VC will be more willing to listen if he feels you’ve already been screened. That’s not to say, however, that you can’t make the pitch on your own. “We’ve done deals with totally cold pitches,” says Ashley. “But your better chance is to go through a warmer entrance.” Tip: try to find a broker who has already worked with the VC you’re targeting.
Plan ahead
If you’re going to mail in your plan cold, then a succinct business plan is key. Within 10 to 30 pages, you should be able to summarize, among other things:
- your product or service
- how it fits and will change your industry
- the type of financing you’re seeking
- how much money you need and why
- your projections of where the business can go
“It doesn’t have to be the fanciest PowerPoint [presentation],” says Ashley. “To be honest, the slicker it gets, the more nervous I get.”
Reality bites
You’ll never get the interest of a VC if your idea isn’t demonstrably feasible. In developing your business plan, take a careful and critical look at the viability of the project and a rational requirement for funds. A healthy dose of realism helps. “I once got [a cold pitch] from somebody who had an invention that they thought was much more significant than the atomic bomb or anything Einstein had ever developed. It would have annual revenues of around $100 billion.” Not surprisingly, Ashley opted to not follow-up on it.
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© 2003 Allan Britnell
