Deal Origination

The Venture Capital investment proposals originate in a number of ways and from a number of sources. The traditional method of deal sourcing has been through referrals, but it is on the decline now. VCs are happy to be contacted by email, mail, fax or telephone and most of them have websites which describe their investment focus and criteria. Some VCs also use intermediaries to  match investments with their criteria.

Whatever method of deal origination, most VCs would like to see at least an executive summary of 3-5 pages on the business proposition when the contact is made. Some want to see the full business plan at the time of contact. You should get familiar with the policy of the VCs by visiting their websites to ensure that the information required by them for initial screening is available with you when you make the contact with them.

Although VC are likely to keep the information supplied by you confidential, you may like to consider taking safeguards like:

• Checking on conflict of interest such as an investment in your competitor
• Leaving out the more confidential data 
• Sending only your executive summary
• Confidentiality letter - before sending the business plan you may ask the VC to sign the confidentiality letter but you should ensure that the potential investor has received your executive summary and has shown an interest in giving your proposal detailed consideration. Quite a few VCs do not sign such letters as a matter of policy. It is best to clarify with the VC before initiating discussions on its policy on signing confidential letters.

You should expect a response within 7 –10 days of your submission of the information to the VC. This will either be a prompt no, a request for further information, or a request for an investment process meeting. If you receive a no, try to find out the reasons as you may have to consider incorporating revisions into your business plan, changing/strengthening the management team or carrying out further market research before approaching other potential investors.