Top Five Items to Consider before Approaching VC Funds


MarketsIn a recent meeting with a medical device executive, he related to me that an investment firm’s portfolio investment in medical devices only generated a 4% ROI.  With the last $10 million remaining in the fund, the limited partners demanded that the investment firm invest the capital in anything but medical devices!  Even CALPERS, a leading limited partner, has a mandate to its retirement membership to generate a 7% or higher ROI.  So I clearly understand the limited partners’ frustration. But we discuss in my blogs only about startups and how to attract or find investment funds. Unquestionably I always find these 5 points helpful when knocking on VC doors:

  1. Seeking investors is a marketing problem — make sure that your company fits the VC investment profiles.  For example, don’t go to a VC firm that only invests on software if you are a medical device startup.
  2. Make sure that the Executive Summary and the Pitchdeck clearly defines what business space you are in the first 2 paragraphs. If any of the documents are vague, it will most likely be placed in the reject bin.
  3. If the VC fund has been burnt in the space, don’t bother persuading them otherwise. As I insinuated above, the limited partners control the VC fund, not vice versa. Go to another VC firm with a higher success ratio in the same space. Some VC firms are more successful than others.
  4. Note above that the firm was exhausting its investment funds. Inquire the firm beforehand to find out what percentage has been committed so far.
  5. Draft your documents clearly and define the points needed by the VC firm. I do address them in earlier blogs, and they make sense: What does the company do? How large is the Space? What is your team and your product? How is it different from the competitive environment? What are the barriers to entry? How much capital is needed for this round?  Do you support all of the points in a well articulated business plan?

When this executive related to me this fund raising problem for medical devices, I thought about how to handle the challenges to raise money for medical devices. But to every problem, there is a solution. And the best approach for dealing with investment firms prior to handing them presentations is to hit each and every point addressed above.  Otherwise it will be a disappointing experience.

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About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP, jrzarco2001@yahoo.com, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy. http://www.docstoc.com/video/89135472/make-your-business-an-international-presence; http://www.youtube.com/watch?v=fx5gijf3yoc For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
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