In order to make a good impression, business owners must show that they are knowledgeable and prepared. There are various kinds of venture capital firms that target different types of businesses at different stages. Business owners should get as much information as they can about the different funds available and research the companies that they’re planning to proposition.

“It’s important to get your proposal to the right people effectively,” says Sid Chambless, the executive director of Nashville Capital Network, a hub for early stage capital formation in Tennessee. “Blindly sending plans out will not benefit your company in the long run.” Regardless the amount of time and effort put in, an ill-aimed business proposal will be nothing more than a waste of time—rejected in the mailroom by an intern before it even gets into the hands of the big decision makers.

“Most of the time, we’re turning people down because they don’t meet our investment criteria,” says Shawn Malleus, director of business development at Commerce Capital. For example, a business that’s too early in its life cycle will be rejected by Commerce Capital, regardless of how wonderfully put together it is.

It usually helps to be introduced by one of the firm’s current portfolio companies, Chambless admits. Though this isn’t required by all venture capital firms, it is a way to build rapport and demonstrate genuine, well-researched interest. “Referrals can help,” says David Swenson, general partner at Coleman Swenson Booth. “If we’ve made money with a portfolio company who feels confident in this new company’s work ethic, it makes it easier to get comfortable with the new business venture. But a lack of a referral is not a door slammer.”

Once a business owner has demonstrated a thorough knowledge of the company that he or she wishes to approach, the real test comes in presenting the actual business plan. For this, organization is key. “Companies must have a well-thought-out business plan and be able to show the investor how they’re going to get a good return on their investment,” Swenson says. With the huge amounts of money and quite possibly the future of one’s company at stake, it’s important to be as prepared as possible.

“You have to remember that investors are looking for a reason—any reason—to tell you ‘no,’” Chambless says.

One frequent excuse for saying “no” involves the management of the applicant company, as often the VC firm is making a bet on the management team rather than the company. “You must have an experienced management team, preferably one that’s worked together for a while,” Swenson says. “We have many portfolio companies. We don’t have time to be managing at the operational level.” Some companies don’t give enough information about who the managers are and what their involvement would be. Chambless recommends that companies outline the experiences and past successes of the management team in the business plan itself. Many companies leave this step out and in doing so, weaken their proposal.

Another big mistake made by companies when presenting their business plans is the failure to account for the competition. There is always competition, Malleus stresses. You must show investors that you know who your competition is and, more importantly, what gives your company an edge over the competition. This requires a compelling story, built around a solid, realistic business plan.

“Realistic projections with valid assumptions driving those projections—that’s important,” Chambless says. “If a business owner goes into a meeting and says, ‘There’s a billion dollar market out there, and we’re going to have 50% of it,’ investors will be hesitant. While investors like to see big numbers, they like to know exactly how you’re going to get there. They like to hear, ‘We’re going to sell x number of units and make x amount of money and capture x percentage of the market.’” A specific, finely detailed business plan will help to increase investor confidence in the company.

“Whatever you do,” Malleus says, “don’t approach any type of funding institution until you have your business plan perfected and have spent time practicing pitching to investors. You should try to anticipate the types of questions that they’ll ask so that you’ll appear as prepared and as informed as possible.” After all, you get only one chance to make a good first impression.

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