ASSUMING that you have identified venture capital as the correct route for your business – and it’s important to remember that this is not the most appropriate finance option for all businesses – it’s crucial that a business is ‘investor ready’.
Venture capitalists always look for specifics when considering an investment and companies can prepare by aligning themselves with the individual VC company’s criteria.
Energy Ventures IV fund, with a committed value of $350m is open for new investments for technology led and early growth upstream businesses. With competition for venture capital funding increasingly competitive, the advice of Greg Herrera, partner of Energy Ventures is invaluable for any company seeking growth investment.
Are you ready for the F1 pace?
Is VC finance the correct path? Venture capital, like an F1 car, will get you where you want to go faster; but it’s not the right vehicle for going to the supermarket. Look carefully at what you really want from the relationship – it’s unlikely to be right for you if you are a small family concern or a community enterprise. It’s more likely to be for you if you have a proprietary, market proven and innovative technology which has global potential.
Venture capitalists are not swayed by audacious claims of global sales predictions. They look for your assessment of risk and want to know if you have considered what will happen if the technology fails or if there are potential health and safety issues. Evidence of reducing risk is far more important than overconfident sales forecasts.
Do you have a rapport?
It usually takes far longer than expected to achieve milestones in new developments. That time can be stressful for all concerned. What will ease the tough times is the ‘social capital’ you get from working with people you like and respect. Your senior team has to be strong as in tough times a rift can be easily whipped up into unmanageable conflict which can rip a company apart. Make sure your team is strong and prepared for stormy weather and ensure that you work with a VC team you trust and respect – and from whom you will be willing to take advice and guidance in hard times.
Don’t confuse finance with accounting
Most companies understand the importance of financial control, but fewer understand the critical role the finance discipline plays in a venture. If you are serious about investment then a CFO is a must. Accounting will tell you what happened in the past – but a good CFO will help plan the financial future and will play a crucial role in helping to raise funding. In fact, the CFO may be in a better position to negotiate venture capital funding terms than your CEO – and that can be a difficult position for a business owner to accept.
Sales and more sales
Many companies we see have an impressive research and development programme and can prove their financial stability… but their sales function is haphazard. A structured sales strategy is key to future growth. We like to see customer profiles which include motivation, influencers, risks and values. This also makes it easier for our team to connect our client companies with potential buyers.
Energy Ventures provides capital and energy industry expertise to high growth oil and gas technology companies. The Energy Venture client portfolio includes Read Well Services, Zi-Lift, Deep Casing Tools, Fotech, Arkex, FFA, Red Spider Technologies and Sigma Offshore.
More about the company can be found at www.energyventures.no.
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