- They want control of my company
VC’s are in the business of investing in companies, not running them. VCs will want a fair portion of the company based on the valuation at the time of their investment. They will only want the option to consider control if your management team fails to execute.
- They offer unreasonable terms
Some terms may seem unusual or unfair to an entrepreneur. For example, there may be a provision requiring the company to redeem investors’ stock at a certain price after a certain period. Keep in mind that such a redemption represents a failure on the part of the VC, which will do everything possible to avoid taking this step.
- They are only interested in the financials
Venture capitalists tend to be concerned with the market, your technology and management team much more than just the numbers.
- They have unrealistic performance expectations.
VC’s make high-risk investments and expect high rewards. Venture backed companies have proven it is possible to achieve 40 to 50 percent annual growth.
- They demand an early exit strategy.
VC’s expect a return on their investment in the form of cash or securities. Without an exit strategy, there is no return to their investors.
- Their valuations are lower than my private investors.
VC’s participate in business planning, sales strategy, key hiring decisions and links to the larger capital markets for additional investments or an IPO. In contrast, private investors tend to be less involved and therefore offer less value.
- They won’t invest in small deals.
VCs typically don’t consider deals less than $5 million, but smaller deals can get funded if you know where to look (BusinessFinance.com).
- They are too quick to pull the plug.
VCs are very concerned about the performance of their portfolio. VCs will usually try to keep a company viable if at all possible.
- They refuse to sign nondisclosure agreements.
VCs see a lot of deals, it causes them too much liability to look at thousands of companies without violating someone’s nondisclosure agreement.
- Venture capitalists are impossible to get to see.
The right introduction is the key, without it you are faceless in a sea of business plans.