Best Practices When Seeking Financial Backing From a Venture Capitalist

Published on
January 3, 2023
Best Practices When Seeking Financial Backing From a Venture Capitalist

Startups often run into difficulties when seeking financial backing from a venture capitalist. It requires an extensive amount of preparation, research and due diligence in order to make the most out of your pitch.

In this blog post, we'll explore some key strategies for identifying the right VCs, preparing a compelling pitch deck that will draw interest from investors and understanding how to negotiate terms with them once you've made contact. We'll also look at best practices when seeking financial backing from a venture capitalist.

Angel Investors: Get Access to Deal Flows

Ready for your next investment? Gain exclusive access to the best companies that Angel School has vetted. Our investors see success through our excellent deal flow and world-class diligence. We source hundreds of companies and invest selectively, with a fully transparent process. So join our growing global community, and see what a diversified deal flow and a talent for choosing good deals can do for you.

Identifying the Right Venture Capitalist

The first step when seeking financial backing from a venture capitalist is to identify the right VC. And when it comes to identifying the right venture capitalist for your business, research is key.

Look at Investment Criteria

Start by researching potential investors and their investment criteria. Look into what industries they typically invest in, what size investments they make, and how long they usually hold onto investments. This will help you determine which venture capital financing are most likely to be interested in your business model.

Analyze Investment Criteria

Next, analyze the investment criteria of each potential investor carefully. Take note of any requirements or preferences that may not fit with your current business plan or strategy. For example, if a venture capitalist prefers to invest seed money in early-stage companies but yours is already established and profitable, then this particular investor may not be the best fit for you.

Does Your Business Model Fit?

Finally, assess how well your business model fits with each prospective investor's criteria and goals. Consider whether their expertise could benefit your company as well as whether their expectations align with yours when it comes to growth plans and exit strategies. It is important to find an investor who shares similar values so that both parties can work together towards achieving success for years to come.

Preparing Your Pitch Deck

Preparing your pitch deck is a critical step when seeking financial backing from a venture capitalist. A comprehensive and well-crafted pitch deck should outline your business plan, highlight your team and track record, and demonstrate the market opportunity and growth potential of your business.

Outline Your Business Plan

The first section of the pitch deck should include an overview of the business plan that outlines the following:

  • Your value proposition and vision (what you are proposing to do).
  • The problem you are addressing.
  • Whose problem you are addressing (your target market).
  • Your solution (your product).
  • When the product or service will be completed.
  • How you will earn from it.

This provides VCs with a snapshot of your company, as well as how it intends to sustain itself and profit.

Highlight Your Team and Track Record

Investors want to know they are investing in experienced professionals with a proven track record of success. Include biographies for each member of the management team along with details on their experience related to the proposed project or venture.

If possible, provide evidence such as case studies or testimonials that demonstrate past successes related to similar projects or ventures these individuals have been involved with previously.

Share Your Financials

VCs look for opportunities with the potential to generate significant returns on investment over time, due to high demand in the marketplace. To demonstrate market opportunity and growth potential, data points such as current market size estimates and projected growth rates based on trends seen within other industries or markets related to yours should be showcased. This will give investors an understanding of how big this opportunity could become if successful execution occurs after they invest their funds into your project/venture today.

Roadblocks and Competition

Part of your pitch is showing your competitors and potential roadblocks to success. A small business startup might be afraid of divulging this info to a VC, but this transparency will build confidence for investors--especially if you have a plan to beat your competitor

Investment Terms

Finally, make the pitch. When seeking financial backing from a venture capitalist, be direct and ask what your startup really needs. Be transparent and share with the VC how you intend to use it, and what you are willing to offer them in return.

A pitch deck that is sincere and straight to the point is a recipe for VC funding success. Make sure you rehearse the pitch multiple times with a mock audience, so you have time to hone the deck and your delivery.


Making the Pitch to Venture Capitalists

Making the pitch is critical when seeking financial backing from a venture capitalist. It’s important to be prepared and confident when making this presentation, as it can make or break your chances of getting funded.

Prepare for Questions and Objections

Before meeting with potential investors, anticipate their questions and objections so you can prepare effective responses. Research the investor’s portfolio and industry trends to understand what they look for in an investment opportunity.

Have a clear understanding of how your product or service fits into their criteria, then craft answers that highlight why you are the best fit for them.

Showcase Your Unique Value Proposition

When presenting to VCs, emphasize what makes your business stand out from other competitors in the market. Focus on features that differentiate you from others such as unique technology solutions or innovative products/services that offer superior customer experiences.

Be sure to back up any claims with data points such as user engagement metrics or revenue growth figures if applicable.

Follow Up After The Meeting

After pitching your idea, follow up with investors within 24-48 hours via email or phone call depending on their preference indicated during the meeting. This will help keep you top-of-mind while they consider investing in your company versus other opportunities they may be evaluating at the same time.

Additionally, staying connected allows them to get updates about progress made since the initial pitch which could potentially increase their interest level even further.

Negotiating Terms of Investment with VCs

Negotiating terms of investment is an important step when seeking financial backing from a venture capitalist. It’s essential to understand valuation and equity split considerations, clarify the rights, responsibilities, and expectations of all parties involved, and draft an agreement that protects all interests involved.

Understand Valuation and Equity Split Considerations

When negotiating terms of investment with VCs it’s important to have a clear understanding of the value you are offering them for their money. This includes determining what percentage of ownership they will receive in exchange for their capital.

They should also know any other benefits or incentives they may be receiving such as board seats or access to your network. Additionally, it’s important to consider how much control you are willing to give up in order to secure the necessary funding.

Clarify Rights, Responsibilities, and Expectations of All Parties Involved

In addition to discussing valuation and equity splits when negotiating terms with VCs it’s also essential that both sides clearly define their respective rights, responsibilities, and expectations so that everyone is on the same page going forward.

This should include things like who has authority over business decisions within the company. Both parties should also agree on milestones or targets that must be met before additional funds can be released from investors.

Put Everything in a Formal Agreement

Once both sides have agreed upon a set of terms, it is time to put everything into writing via a formal agreement. This should include details about valuations/equity splits, rights/responsibilities/expectations, timelines, and exit strategies.

This is in order to ensure that all interests involved are adequately protected regardless of future events or circumstances beyond anyone's control.

Key Takeaway: When negotiating terms of investment with venture capital financing, it is essential to have a clear understanding of the value you are offering them in exchange for their capital, define rights, responsibilities, and expectations of all parties involved, and draft an agreement that protects everyone’s interests.

Managing the Relationship with VCs Going Forward

When seeking financial backing from a venture capitalist, it is important to maintain a strong relationship with the VCs in order to maximize the potential of your business. Establishing clear communication channels between yourself and VCs will ensure that both parties are on the same page, enabling you to keep them informed of progress and challenges while leveraging their expertise to grow your business over time.

Establish Clear Communication Channels

The first step in managing the relationship with VCs is establishing clear communication channels. This can be done through regular meetings or emails where updates are provided, questions are answered, and feedback is given.

It is also important for both parties to agree on what information should be shared and when it should be shared in order for effective communication to take place.

Keep VCs Informed of Progress and Challenges

Once communication channels have been established, it’s important for entrepreneurs to keep VCs informed of progress as well as any challenges they may face along the way.

Doing so allows investors to provide valuable advice or resources that could help overcome obstacles more quickly than if left unaddressed. Additionally, providing regular updates shows that you value their input which can go a long way toward building trust between all involved parties.

Regularly Seek Advice

Don't forget that venture capitalists bring more than just capital. They often have extensive experience working with startups which can be invaluable when navigating unfamiliar territory or making difficult decisions about growth strategies or operations management.

Take advantage of this by seeking out their advice whenever possible. Even if you don't always agree with what they say, hearing different perspectives from experienced professionals can help broaden your understanding of the industry and give you new ideas about how best to approach certain situations going forward.

Conclusion: Best Practices When Seeking Financial Backing From a Venture Capitalist

You may be intimidated when seeking financial backing from a venture capitalist. But with the right preparation and knowledge of the market, it can be done successfully.

By following the best practices laid out in this article, you will have taken all necessary steps toward securing financial backing from venture capitalists. With this approach in place, you’ll be well on your way to growing your startup.

About is a Fellowship program dedicated to helping Angel Investors build syndicates. We give Program Fellows a syndicate blueprint in just 8 weeks.

After that, they’re invited to join our Investment Committee (IC) to get real deal experience AND earn carried interest. Apply for the next cohort of our Syndicate Program here.

The Syndicate is backed by 1000+ LPs and deploys $MNs annually. Subscribe here for exclusive dealflow.

Related category:
Jed Ng
Jed Ng

“Jed is the Founder of - a program dedicated to helping angels build their own syndicates.

He has a track record of exits and Unicorns, and is backed by 1000+ LPs.

He previously built and ran the world's largest API Marketplace in partnership with a16z-backed, RapidAPI".

Get exclusive access to Angel School deals. Invest alongside our community of 750+ LPs
Subscribe to Dealflow
Ready to build your own Syndicate? Join the Angel School Fellowship program.
Apply To Cohort
Are you a startup seeking investment from Angel School?
Apply For Investment