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What does venture capital mean for social media startups

Estimated reading time: 8 minutes
What I’ll learn from this article: Is Venture Capital what your startup needs? If so, here are some tips for you.

What does venture capital mean for social media startups | Staff Leverage blog

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You might think that getting a Venture Capital is vital for business growth. Well, you are not wrong, but also you are not 100% right.

VC firms are without a doubt an excellent way for startups to grow. In exchange for equity, more than just funds, you’ll gain a mentor, an advocate at the firm and even a promotion. Getting this collaboration is useful as your company grows, but it will never mean instant success. Think of yourself and how you involucrate in your business and I assure you that you’ll find the key to achieve success.

Look at this great man and also a great example: His name is Isaac Childres, he showed that life is indeed an adventure and it’s okay to take risks as long as you never surrender on your goal your dreams can become reality.

Whether you are a funder or a founder reaching your goal will be difficult, but an adventure will always be full of risks and is your duty as a startup to make it worthwhile.

Before entering on this trip let’s make sure you have everything prepared. I strongly recommend you to do your homework - research, analyze, and understand what’s the goal of your startup to verify if VC is necessary to achieve it.  

Is VC really what you need?

Picturing your idea, being one of those few startups that made it and having the opportunity to be bigger than ever makes raising VC sounds really tempting. Unfortunately, it’s not all a bed of roses. The percentage of startups that gets VC is low, and for the ones who succeed after getting it is even lower.

Even though your idea is great don’t expect to get funded easily, the odds are against you and getting VC could end up being a really long process that could become a huge distraction, and ultimately unnecessary. So, before you go out and try to raise VC, take your time to understand if you really need it by asking yourself the following questions:

Will your business ramp up all the way to the top until the end?

Entering the VC world means to start climbing a really, really high ramp, and as slippery as they are a mistake would mean to go down easily. VCs want you to aim for the top, your mental, as well as your goals, have to be huge. They want your statistics to go up really fast.

It’s really important to not forget that VCs are interested in selling, not building. They want your business to exit in the biggest way possible. If you want to maintain your business as much as possible you might want to reconsider raising VC.

Do you want to retain as much ownership as possible?

In a normal business in which you and your co-founders own 100% of that business, the owner piece has full value, but if you seek VC funding, the ownership equation could change to your investors acquiring almost half of your business, sometimes even more than a half.

In order to own an equivalent valuation, you'd need to scale your business to higher levels, but in many cases reaching higher valuation is challenging.

However, let’s remember that with VC funding comes VC support and advice. VCs have seen many companies succeed, and many fail. Although all of them are different in this regard they will support you with their experience, advice, and contacts.

This last part is crucial in the business world. VCs will connect you with other people and companies increasing your business reach. It’s important to make good use of these connections because connections lead to promotion and promotions lead to profit.

With a VC you won’t be walking alone. Still, if you don’t want to share the ownership of your startup, VC is definitely not what you are looking for.

Do you want to have autonomy and full control?

Being funded by VCs strongly means one thing: They own part of your company now, therefore you have to report to them.

A VC might not be your new boss although it could feel that way, but they have a strong influence on your business causing a big impact on your ability to run the company. VCs will almost always demand one or more board seats. They’ll form part of every meeting, intervene, give orders, and more importantly, they could change your strategic plan.

Choose your investor like you would choose your wise, they’ll be with you for the next 10 years or so.

It’s wise to know your funder before working him. I don’t even want to imagine being in the wrong terms with my VCs, they could give you full workloads without considering your situation. That’s the other issue, you don’t have full autonomy.

Maybe you were accustomed to doing your work at your own pace, you are the CEO, so you decide how fast or slow things move around your business. Having a venture capital investors could mean the opposite of that, they’ll want you to act as fast as possible to produce a higher profit. You don’t have the full autonomy to choose how fast to scale your business anymore.

Finally on this topic, if you don’t like to report to someone else and feel like you are getting bossed around, at this point I recommend you to look for other ways to raise capital.

Okay, now that we have that part cleared if you are still feeling like what you need is VC I won’t be the one to tell you otherwise because, although always a risk, VC doesn’t mean failure in all its cases. There are good things that might come to you if you follow the hard path to gain venture capital funds.

I already told you that the percentage of startup to get funded is really low, so let me teach you some ways that would make VCs be interested in you.

How to Attract VC Investors

As venture capital investments are always a risk, VCs most of the time don’t get the revenue they expected to gain being that one of the reasons of why VCs don’t invest in every idea they think it's good.

More than just being good, you and your startup have to have the potential to grow fast and big, profit will always be the main goal for VCs and with that in mind let me show you a few tips to make VC investors interested in you and your startup:

Don’t say venture capital when you mean angel investment

These two terms have many differences but still, are often confused. One of the differences is that angel investors are accredited investors who use their own money to invest in small businesses whereas VC firms typically use money pooled from investment companies, large corporations, and pension funds.

These two are 2 different concepts, but since I already explained to you what a VC exactly there shouldn’t be much problem with this part. Still, it works as a reminder for you, don’t take venture capital lightly.

Know how to approach

VC firms never actually cared for unsolicited email templates, this is not the 80s anymore, there are lots of ways for you to meet up with investors. Avoid email templates, they will just be a bothersome waste of your time.

Don’t think for a minute that any serious investor would ever read a summary memo, or watch a pitch, much less read a business plan via email and if they end up doing it, do you really think that they would think This is the one I have to invest know! - I highly doubt it.

It’s also a bad idea for you to do this because it could end up hurting your own business, before getting fund you have to get to know your investor.

Do your research first

VC firms expect you to know that they won’t deal with people who aren’t in their category - for their sake and yours - Investigate and identify a few VC firms that invest the amount you need in your industry, stage of development and region.

Let’s have a look at some of the best VC firms that exist out there so you can have an example of what you are looking! When you finish it, you should know where to hit the mark so be sure not to make any mistakes before moving to the next tip.

Have your elevator pitch ready

Elevator pitches have something in common with commercials, they say a lot in a short time and as good commercials, your goal is to spark interest in your investors with few words as possible. You know an idea is good when is presented to you in 3 to 5 words and you get the whole thing.

Prepare your elevator pitch, get your key points on point and be ready to lure investors using your eloquence.

After the first presentation if they like your startup they’ll ask you for more information about it. It’s recommendable to have your plan already prepared. To tell you the truth, some investors will reject your business without reading your plan. But 100% of them won’t invest in it without reading the plan first.

Although you noticed that they truly showed interest in your startup when a VC says yes it could also mean maybe, so expect the whole process to last several months.

Final thoughts

VCs are always looking for passionate investors that want to change the whole game, they want you and your startup to be aiming for the top and only for the top. They don’t care about how you do it or if you end up changing the whole strategy they want you to get traction and to make use of every tool you have and that they can give you. Also, it would be a good idea to have an idea about your exit plan.

On a final thought, remember, as a startup the definition of VC could vary depending on the approach you want to take, as it could mean an opportunity it could also mean a hindrance. Before spending time trying to raise VC funds, consider all your options. VC is not the only way for your business to get started.

If you are going to try VC I hope you like to work hard, because that’s what’s expecting you ahead.

Now that you've learned about these tips, share them! And if you would you like us to talk about a specific topic? Then contact us and let us know!

By John Mackenzie – Founder & CEO of Staff Leverage, NT Digital and JohnMac Digital

Do you want to be successful? We know how you can be. For more information on the previous topics and deeper insight into the intricacies of efficient business, see the following articles:

  1. EGO (GOOD & BAD) AS A CATALYST FOR SALES
  2. 7 WAYS TO ACHIEVE SUCCESS, THE KJAPANESE WAY
  3. MASSIVE BUSINESS DISRUPTION


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John Founder CEO

Hello There, I’m John Mackenzie! CEO at Staff Leverage. An Australian visionary committed to change businesses all over the world.

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