Venture Capital financing

But how can this Transformation be financed? We need to invest in new supplier networks, new delivery trucks, new refrigerators... 

The investment is too great for my Business Angels, and the banks still don't trust me.

You're not successful enough yet to convince the bankers, but you are for the Venture capitalists: they know how to risk bigger amounts than the Business angels. Be careful to choose those who take a long-term view and are not just focused on quarterly results.

The Baker selects those who take a long-term approach and convinces them to finance this transformation.

  1. After the Business Angels, the Enterprise needs Venture capitalists

    The Business Angel can help at the start, but does not have sufficient means to support phase 2, that of growth or a costly research and development phase. To give a rough estimate, financing needs are then above one million euros.
    This is where the Venture Capitalists come in, who have more means at their disposal than the Business Angels. They invest amounts ranging from 1 to 10 million euros over 3 to 5 years to finance high-growth, innovative Enterprises. They are no longer individuals, like the Business Angels, but specialist management companies who use investment fund resources dedicated to this category of Enterprise.

    The Corporate Venture enables large groups to invest as minority shareholders in small companies that are growing. It is one way for these groups to carry out strategic monitoring, to become aware of innovative procedures and to integrate a new entrepreneurial dimension into the Enterprise Culture.

  2. Short- or long-term Approach?

    In the digital world, we look to create volume before making the Model profitable: a short-term profitability approach does not make sense. Operational Actions such as "control Product quality" or "control customer satisfaction" have a price. Getting rid of these expenses increases margins in the short term, but compromises the future.

    However, some complain that enterprises are often only managed according to quarterly results. Quarterly results do make sense if they are part of a long-term budget framework which includes these investment expenses.

    We therefore have to choose Venture Capitalists who have a long-term vision and accept to adapt the strategy as the enterprise progresses in its Market: it is important that they are not just financiers, but that they have a vision of what the Enterprise start-up can achieve in the long term.

  3. How to present your Enterprise to attract investors?

    • Make it simple : they can only like what they understand.
    • Show how your Product gives your Enterprise a competitive advantage: which differentiators?
    • Highlight the quality of the management team : this is the most important criteria for investors.
    • Develop a financial plan: it is rarely realized as planned later on, but it brings a Model to build upon for the future
    • Avoid The Top Ten Lies of Entrepreneurs by Guy Kawasaki
      • "Our projections are conservative."
      • "(Big name research firm) says our market will be $50 billion in 4 years."
      • "(Big name company) is going to sign our purchase order next week."
      • "Key employees are set to join us as soon as we get funded."
      • "No one is doing what we're doing."
      • "No one can do what we're doing."
      • "Hurry because several other venture capital firms are interested."
      • "Oracle is too big/dumb/slow to be a threat."
      • "We have a proven management team."
      • "Patents make our product defensible."
      • "All we have to do is get 1% of the market."

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