Never Get Your Hopes Up

Are you that "One in a Thousand"?
They say that the average venture capital firm reviews around 100-plus business plans every week and ends up eventually investing in 5 - 10 businesses a year.  That means out of 5,000 companies (or 5,000 business plans) that venture capital firms see, they invest in around 5. This translates to 1 company per 1000 business plans that come across the VC's desk. 

Is that right?

Do you mean only 1 company succeeds out of 1,000 companies that see the VC firms or that send in their business plans for consideration? Tough odds. It means you'd have to work very, very hard to be that 1 out of 1000.

It also means you may not want to bother with approaching venture capitalists and going through the whole process, resulting in hours of wasted time and money unless you have a proposal that is a potential winner.

Approaching funding from venture capitalists is a definite "yes" for some companies, but you need to keep your feet firmly on the ground. Be real. It is not easy. For some it will make all the difference. For others it will be a futile and demoralising exercise.

Remember 1 in 1,000 companies – it’s not a lot but you may be that one winner. You could also be the 999 losers who spent considerable money and time trying to win with the VC's.

Whether the statistics are correct or not, the lesson to be learnt is this. Having that first meeting with a venture capitalist means "zilch" so don’t read too much into it. It's when you are up to meeting number 10 that you may have a chance.

In any event trying to borrow hard cash from anyone (including institutions or banks etc) to put into a business that could “go down the gurgler” is never easy. 

Don’t expect venture capitalists to be any different.

The Answer is – NO!
It’s hard getting a straight answer from most venture capitalists. For some reason most will steer you along for months and they don’t seem to have the ability to say a simple "yes" or "no" to your proposal or application.

Receiving a prompt rejection is much better for your fledgling business than a long, drawn-out "maybe". When talking with venture capitalists it pays to do a little reading between the lines otherwise you may be waiting around for a long time.

Consider the following points so you can invest your time more wisely.

A) VC - "Let's touch base in a few months"

Why would they wait that long if it’s a great opportunity for them?

Tip 1: If you don’t get a call within the next week, the answer is NO.

B) VC –“We'll get back to you"

Sounds great, right? You get excited and wait around home for the next 2 weeks with all your financials, business plans and a mountain of information. This definitely looks like your big chance.

Tip 2: If telephone calls and e-mails aren't returned after a positive meeting, the answer is NO.

C) VC" – “One of our associates would love to take a look at this"

VC’s will tell you how their associates are excited about it and will come back for more discussions. This promise can be a waste of time for you - so watch it carefully.

Tip 3: If you've met more associates than partners and nothing is happening, the answer is NO.

The biggest asset a venture capitalist has is time. They don’t like wasting it. If you don’t hear back within a reasonable time your chance of success is slim.

Ask the venture capitalists to be up-front and honest with you right from the start. Check their body language. Trust your instincts, nine times out of 10, you will be right on.

Why is it so hard to just say NO?