Transcript:
Ingrid Welch:
As former in house counsel and investment committee member at a private investment boutique, I reviewed hundreds of company proposals. After a company passed the first screen, meaning we believed its products or services were innovative and likely to gain market acceptance, three considerations emerged as being the most important in our evaluation.
The first is the strength of the company's financial controls. The greatest concern for a venture capitalist or a private equity manager is the company's financial integrity. These managers have to rely on the information they review during due diligence and once an investment is made.
As an entrepreneur, you probably wear many hats. But before you seek venture capital financing for the series A round, it is worth the investment to separate the financial function from the chief executive function. Implement a system of financial controls and retain an independent accountant to prepare your financial statements.
The second criteria is the quality of your marketing plan. Even the most innovative ideas can be challenging to commercialize. You must be able to demonstrate that the market for your product or services is sufficiently large to justify sustainable sales growth. Then you have to demonstrate how to penetrate the market or increase market penetration, overcome any barriers to entry and gain a competitive edge.
Your marketing plan should be well developed, focused, supported by market data, and achievable. I've seen companies try to do too much only to find that their sales effort is disorganized and fails to gain significant traction. Stay focused on the most promising initiatives, and identify or hire the best people to run those initiatives.
Lastly, just as with your financial records, a venture capitalist or private equity manager will review your business documentation to verify your claims. It is important that your documents are complete, fully executed, and well organized. The inability to produce business records could result in the need to reproduce them in less advantageous terms, or worse yet, for the investor to lose confidence.
You can find a list of important business documents on our website under Resources. If you have any questions or would like to learn more about this and other issues facing startups and emerging companies, visit us at cozen.com/copilot.
